Dismissed

Rajeev Thyagarajan v. Hdb Financial Services Ltd.

DRT3 Apr 2025SA/310/2023

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal dismissed an application seeking to set aside an auction sale under the SARFAESI Act. The applicant alleged lack of security interest registration, undervaluation, missing easement disclosures, and failure to obtain consent for sale at the reserve price. Relying on Varghese Ukken, the Tribunal held that consent is not required when the sale price equals the reserve pric

What did the court decide?

The Securitization Application (SA No.310 of 2023) is dismissed with no order as to costs.

Rajeev Thyagarajan versus Hdb Financial Services… — Contract and Commercial Disputes | DRT (2025)

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Fair Order

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IN THE DEBTS RECOVERY TRIBUNAL - 1 AT ERNAKULAM

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DATED THIS 3^rd DAY OF APRIL, 2025

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PRESENT: Su. WILLYAHM, B.Sc., M.L. [DISTRICT JUDGE - Retd] PRESIDING OFFICER

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S.A No. 310 of 2023

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Between

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Rajeev Thyagarajan, S/o. V. Thyagarajan, 11A, Transwom, Landmark World, Bypass Road, Kozhikode – 673 014.

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--- Applicant

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And

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Authorized Officer, HBD Financial Services Ltd. 2^nd Floor, La-Grace Building, Above Axis Bank, Near IQRAA Hospital, Wayanad Road, Malaparamba, Kozhikode – 673 009.

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Rafeek K.P. S/o. Yousef Karaparambil, Karaparambil, Kottaram, P.O. Valanchery, Malappuram – 676 552.

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Santoshkumar T.V., S/o. Govinda Marar, Savaria, Paroppadi, P.O. Marykunnu, Kozhikode – 673 012.

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SA No.310 of 2023

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Hussain C., S/o. Beeran, Chungath, P.O. Kanmanam, Thekkumuri, Malappuram – 676 551.

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--- Defendants

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This Securitization Application coming on 19.12.2024 for final hearing before me in the presence of Mr. K.T. Shyam Kumar, Counsel appearing for the Applicant and Mr. Viswanathan, representing the Counsel for the 1^st Defendant and Mr. M.K. Sumod Counsel appearing for the Defendants 2, 3 and 4 and upon hearing arguments of learned Counsels for all the parties and upon perusing the material on records, this Tribunal delivered the following:

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O R D E R

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This Securitisation Application was filed on 13.06.2023 seeking to set aside Annexure-A2 sale notice and to declare that all the measures undertaken by the 1^st defendant for conduct of the sale as invalid and to declare that the auction sale conducted on 24.02.2023 is in contravention of the provisions of the SARFAESI Act and Rules and to declare that the defendant bank has no security interest on the mortgaged property as the same has not been registered with the Central Registry and to direct the defendant bank to restore possession of the property to the applicant and to pay the cost of the proceedings and compensation to the applicant and to allow the applicant to wipe out the whole loan amount by way of remittance of 20 equal instalments.

¶19

The applicant has admitted in the S.A that he along with his father and wife availed term loan of Rs.4 Crores from the 1^st defendant bank and that he has created equitable mortgage over his property admeasuring an extent of 5.329 Ares situated in Re-Sy.No.TS-7-13210 in Block No.13 in Nagaram Village, Kozhikode Taluk as the collateral security in favour of the 1^st defendant bank.

¶20

The applicant has also fairly conceded in the S.A that there happened default in repayment of the outstanding loan due. Hence the loan account of the applicants came to be classified as Nonperforming Asset and demand notice dated 08.04.2019 was issued to the applicants calling upon him to repay the outstanding loan due within a period of 60 days from the date of receipt of the demand notice. The applicant neither sent any objection/representation to the

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SA No.310 of 2023

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demand notice nor did he clear off his liability due to the 1^st defendant bank.

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Therefore, possession notice dated 21.06.2019 was issued for taking physical possession of the secured asset. The receipt of the possession notice is admitted by the applicant.

¶25

Subsequently, the defendants approached the Chief Judicial Magistrate Court Kozhikode and filed application and affidavit under Section 14 (1) of the SARFAESI Act, 2002. Order came to be passed appointing Advocate Commissioner for taking physical possession of the secured asset. Pursuant to the direction given to the Advocate Commissioner, he took physical possession of the secured asset on 18.07.2019 and handed over the same to the 1^st defendant bank. The applicant having aggrieved against the above measures, filed this S.A seeking for the reliefs stated supra.

¶26

The 1^st defendant issued first sale notice dated 17.02.2020 in order to bring the secured asset for sale on 23.03.2020. Sale could not be materialized for want of bidders. Subsequently, the following sale notices were issued in order to bring the secured asset for sale by fixing the date of sale and reserve price as mentioned below :

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Auction	Date of Auction	Reserve pricefixed – Rs.
First	23.03.2020	4,38,05,938
Second	26.03.2021	3,94,25,345
Third	25.01.2022	3,15,40,276
Fourth	25.02.2022	2,68,09,234
Fifth	23.03.2022	2,68,09,234
Sixth	11.08.2022	2,25,19,757
Seventh	04.11.2022	2,25,19,757
Eighth	28.12.2022	2,25,19,757
Nineth	31.01.2023	2,25,19,757
Tenth	24.02.2023	2,25,19,757

¶28

The secured asset was sold on 24.02.2023 pursuant to issuance of Annexure-A1 sale notice dated 03.02.2023. The defendants 2 to 4 became the successful bidders to purchase the secured asset. On deposit of the entire sale consideration of the amount, sale of the secured asset was confirmed and sale certificate Annexure-A3 was also issued to them.

¶29

The counsel appearing for the applicant submitted that no security interest over the secured asset has been registered with the Central Registry. The property was grossly undervalued. The reserve price fixed in the sale notices was in the reducing scale of

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SA No.310 of 2023

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Rs.4,38,05,938/-, Rs.3,94,25,345/-, Rs.3,15,40,276/Rs.2,68,09,234/-, Rs.2,25,19,757/-. The property was being crossly undervalued under each auction. Such disproportionate reduction in the reserve price is absolutely arbitrary and illegal.

¶33

It is further submitted by the counsel for the applicant that at the time of creation of security interest over the secured asset, the value of the property was more than Rs.6 Crores, but the reserve price fixed in Annexure-D7 is Rs.2,25,19,757/-. The sale of the secured asset was not intimated by the 1^st defendant to the applicant. He came to know of the sale of the asset only from the office of the Sub Registrar, Chalapuram, Kozhikode.

¶34

The main contention raised by the counsel for the applicant is that there was no clear 30 days’ notice for sale of the secured asset. The property was sold for the very same amount of Rs.2,25,19,757/which is the reserve price fixed in Annexure-A2 sale notice. The consent of the borrower was not obtained before sale of the property at the reserve price fixed in the sale notice. It is in violation of the second proviso to Rule 9 (1) of Security Interest (Enforcement) Rules 2002. In support of his above submission, he relied on the judgment of the Hon'ble High Court of Madras delivered in Raamaselvam K. and others Vs. Indian Overseas Bank and another [2010 KHC 6808] .

¶35

It is the submission of the counsel for the applicant that Rule 8 (6) (a) of the Security Interest (Enforcement) Rules 2002 mandates that the description of the immovable property shall include the details of the encumbrances known to the secured creditor in order to let the purchaser know the nature and value of the property. The right of easement over the property was not disclosed by the 1^st defendant in the sale notices. Therefore, sale notices are invalid.

¶36

Per contra, the counsel appearing for the 1^st defendant submitted that the secured asset has been registered with the Central Registry and that the sale of the property could not be materialized pursuant to issuance of nine sale notices for want of bidders. A gradual reduction in the reserve price was made as per commercial practice in vogue for sale of the property. The reduction in the reserve price was necessitated in view of lack of bidders and also because of certain negative features in the property, viz. no four-wheeler access to the property, the adjacent property owner having easement right over the property which impeded the market value of the property.

¶37

It is further submitted by the counsel for the 1^st defendant that all sale notices were served upon the applicant. Thought the applicant had sufficient opportunity, he failed to bring his own buyers to purchase the property. As per amended Rule 9 (1) of the Security

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SA No.310 of 2023

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Interest (Enforcement) Rules 2002, only 15 days’ notice is sufficient for subsequent sale of the property. The mere existence of the easement right over the property does not create any encumbrance over the property and it is for the auction purchaser to raise such objection. The value for the property was fixed based upon the valuation report obtained from the approved Valuer.

¶41

According to the counsel appearing for the 1^st defendant, no consent of the borrower is required if the property is sold for the reserve price fixed in the sale notice. This legal position has been affirmed by the Hon'ble High Court of Kerala in its judgment delivered in Varghese Ukken and another Vs. State Bank of India and others [2010 (4) KHC 537] . There is no violation of any provisions of the SARFAESI Act and the Rules made therefore. Therefore, the S.A is liable to be dismissed with cost to the 1^st defendant.

¶42

The counsel appearing for the defendants 2 to 4 submitted that the defendants 2 to 4 are the bonafide purchasers of the S.A subject matter of the property. Physical possession of the property was handed over to them. Ownership of the property was transferred in their name. The allegation of the applicant that the sale of the property was conducted in an unfair manner is false. Therefore, S.A may be dismissed with cost to these defendants.

¶43

The 1^st defendant had averred in the written statement that the security interest over the secured asset has been registered with the Central Registry. The above averment has not been challenged or refuted by the side of the applicant.

¶44

The applicant has not disputed in the S.A with regard to issuance of sale notices, service of sale notices to him, publication and affixture of sale notices. The second proviso to the amended Rule 9 (1) of Security Interest (Enforcement) Rules 2002 mandates that, if sale of the immovable property fails and sale is required to be conducted again, the Authorized Officer shall serve, affix and publish notice of sale not less than 15 days to the borrower, for any subsequent sale. The sale of the secured asset was conducted on 24.02.2023 pursuant to issuance of the tenth sale notice dated 03.02.2023, Annexure-A2. Therefore, only 15 days’ time is required for sale of the secured asset and not 30 days’ time as contended by the applicant.

¶45

It will be pertinent to reproduce hereunder the brief averments narrated in paragraph 4 of the S.A.

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“The defendant bank issued sale notice dated 17.02.2020 proposing to sell the mortgaged property by way of e- auction on 23.03.2020. However, the sale did not place for want of bidders. Thereafter several attempts were made by

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SA No.310 of 2023

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the defendant bank to sell the property by way of auction. Auctions scheduled on 26.3.2021, 25.01.2022, 25.02.2022, 23.03.2022, 11.08.2022, 04.11.2022, 28.12.2022, 31.03.2023 could not be conducted for want of bidders.”

¶50

The question which arises before this Tribunal for consideration is as to why the bidders did not come forward to bid the property. If the reserve price fixed for the property had been very low or had been reduced unilaterally for each and every sale notice, purchasers would have come forward to bid the property. The reason may be that the auction of the property could not be materialized, since the reserve price quoted in the sale notices could not have been the marketable value or saleable value. Be that it may so, the applicant has not produced any material before this Tribunal to prove his contention that the value of the property was more than Rs.6 Crores and that it was grossly undervalued and that reserve price was unilaterally reduced for each and every auction. Therefore, this Tribunal does not find any force in the above submission of the counsel for the applicant.

¶51

The applicant has himself admitted in the S.A that there is no definite determination of the existing easement right over the property and that this issue has to be demarcated and determined on the mortgaged property. The above admission of the applicant strengthens the contention of the 1^st defendant that the issue of easementory right over the mortgage property is one of the factors which led to low demand for the property and also the reason for reduction in the sale price.

¶52

Rule 9 (2) of the Security Interest (Enforcement) Rules 2002 reads as follows :

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“The sale shall be confirmed in favour of the purchaser who has offered the highest sale price in his bid or tender or quotation or offer to the Authorized Officer and shall be subject to confirmation by the secured creditor;

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PROVIDED that no sale under this rule shall be confirmed, if the amount offered by sale price is less than the reserve price, specified under sub-rule (5) ;

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PROVIDED FURTHER that if the Authorized Officer fails to obtain a price higher than the reserve price, he may, with the consent of the borrower and the secured creditor effect the sale at such price.”

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SA No.310 of 2023

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It is not in dispute that the secured asset was sold to the defendants 2 to 4 for the reserve price fixed in Annexure-A2 sale notice. To put it in other words, property was not sold for the price higher than the reserve price fixed in the sale notice. In Raamaselvam K. and others Vs. Indian Overseas Bank and another [2010 KHC 6808] relied on by the counsel for the applicant, the bid offered by the 2^nd respondent who was the only person to bid item No.2 of the properties at Rs.1,85,00,000/- which was the upset price. Similarly, he was the only bidder in respect of item No.3 of the properties quoting Rs.2,35,00,000/- which was the upset price.

¶59

The Hon'ble Division Bench of the High Court of Madras by quoting and interpreting the second proviso to the Rule 9 (2) of Security Interest (Enforcement) Rules 2002 has held as follows :

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“The second proviso makes it clear that if the Authorized Officer fails to obtain a price higher than the reserve price, the sale can be confirmed only with the consent of the borrower and the secured creditor. It is thus obvious that if the price offered is same as the reserve price, it cannot be said that the Authorized Officer has obtained a price higher than the reserve price. A combined reading of all the provisions contained in R.9(2) makes it clear that if the price offered is higher than the reserve price, it shall be confirmed by the Authorized Officer, but such confirmation is subject to further confirmation by the Secured Creditor. If, however, price offered is not higher than the reserve price, which means it may be on par with the reserve price or less than the reserve price, the auction can be confirmed only with the consent of the borrower and the secured creditor and not otherwise.”

¶61

But in Varghese Ukken and another Vs. State Bank of India and others [2010 (4) KHC 537] relied on by the counsel for the 1^st defendant, the Hon’ble Single Judge of the High Court of Kerala has held that the consent of the borrower/defaulter is a must only when the sale price happens to be lower than the reserve price, where prior intimation can be presumed as available to the borrower and that property sold for “reserve price” itself and not a price “higher than reserve price” is not vitiated for absence of “consent” from the borrower/defaulter.

¶62

It is evident from the afore cited two judgments that there is a different opinion between the both Hon’ble High Courts with regard to obtaining consent/non-obtaining consent for the sale of the property at the reserve price fixed in the sale notice. The counsel appearing for the applicant submitted that the judgment rendered by the Division

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SA No.310 of 2023

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Bench of the Hon'ble High Court of Madras has to be relied on by this Tribunal since the judgment relied on by the side of the 1^st defendant has been rendered by the Single Judge of the Hon'ble High Court of Kerala. In support of his above submission, he relied on the judgment of the Hon'ble High Court of Kerala rendered in Shajitha Vs. Akbar [2023 (6) KHC 297] .

¶66

Per contra, the above submission of the counsel for the applicant is countenanced by the counsel appearing for the 1^st defendant contending that since the Debts Recovery Tribunal is under the supervision of the Hon'ble High Court of Kerala, this Tribunal has to rely upon the judgment rendered by the Hon'ble High Court of Kerala.

¶67

In Shajitha Vs. Akbar [2023 (6) KHC 297] the Hon'ble High Court of Kerala has held as follows :

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“ It is not permissible for a Bench of lesser quorum to doubt the correctness of decision rendered by a Larger Bench on an earlier point of time, but will stand bound by the decision rendered by the Larger bench based on the principle of binding precedent and only a co-equal Bench can doubt the correctness of the decision earlier rendered by a co-equal Bench and the option then available is to refer the matter to a Larger Bench”

¶69

The dictum laid down in the aforesaid judgment has to be considered only if the issue has been decided by two different Benches of the same High Court. But, in the present case at hand, the judgment relied on by the counsel for the applicant has been rendered by the Hon'ble High Court of Madras. Whereas the judgment relied on by the counsel for the 1^st defendant has been rendered by the Hon'ble High Court of Kerala. This Tribunal is under the superintendence of the Hon'ble High Court of Kerala on which power has been conferred as per Article 227 of the Constitution of India. Therefore, this Tribunal holds that the judgment rendered in Varghese Ukken and another Vs. State Bank of India and others [2010 (4) KHC 537] by the Hon'ble High Court of Kerala has to be followed in the present case at hand.

¶70

Hence, this Tribunal holds that consent of the borrower who is the applicant herein, is not at all required to sell the secured asset at the reserve price fixed in Annexure-A2 sale notice.

¶71

Indisputably, there is a dispute over easement right on the mortgaged property between the applicant and neighbouring owner of the property. It is for the auction purchaser to worry about this issue and it is not the matter concerning the applicant and the 1^st defendant. Further, in Varghese Ukken and another Vs. State

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SA No.310 of 2023

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Bank of India and others [2010 (4) KHC 537] cited by the counsel for the applicant, the Hon'ble High Court of Kerala has held that nonmentioning of encumbrances in sale notification is not fatal or significant as far as the defaulter is concerned, since absolutely no prejudice is caused to him in this regard. Therefore, this Tribunal does not find any force in the submission of the counsel for the applicant that non-encumbrance was not disclosed in the sale notices.

¶75

The applicant has failed to prove his case that all the measures taken by the 1^st defendant for sale of the secured asset is invalid and that taking physical possession of the secured asset is not in accordance with the provisions of the SARFAESI Act 2002 and Security Interest (Enforcement) Rules 2002. The relief sought for by the applicant to permit him to clear off his liability by way of remittance of the amount in 20 equal monthly installments cannot be granted by this Tribunal, since it does not fall under any of the measures contemplated under the provisions of Sec.13 (4) of the SARFAESI Act 2002.

¶76

In view of the foregoing reasons and discussions, this Tribunal holds that the applicant is not entitled to get the reliefs sought for in this SA.

¶77

Resultantly, S.A No.310 of 2023 stands dismissed. However, there shall be no order as to costs.

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Dictated to Steno, taken down, transcribed, typed by him, corrected and pronounced by me in the open court on this the 3^rd day of April, 2025.

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(Su. WILLYAHM) PRESIDING OFFICER

Mj/

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SA No.310 of 2023

List of documents filed by the Applicant along with the S.A.

¶84

Sl. No.	Date	Particulars
1.	10.01.2023	True copy of the sale notice issued by the1^st defendant.	Annexure-A1
2.	03.02.2023	True copy of the sale notice issued by the1^st defendant.	Annexure-A2
3.	---	True copy of the certified copy of the registered sale certificate No.768/2023 of Chalappuram Sub Registrar’s office Kozhikode.	Annexure-A3
4.	23.02.2023	True copy of the demand draft No.547439 for Rs.22,51,975.70 drawn on Federal Bank, Ramanattukara Branch.	Annexure-A4

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List of documents filed by the 1^st Defendant along with the written statement

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Sl.	Date	Particulars
No.
1.	10.01.2023	Copy of 9^thsale notice	Annexure-D1
2.	---	Copy of postal receipt of sale notice to applicant.	Annexure-D2
3.	---	Copy of AD card received from N.V.Chettiar.	Annexure-D3
4.	---	Copy of AD card received from Manju.	Annexure-D4
5.	---	Copy of AD card received from Thyagarajan Venkararaman.	Annexure-D5
6.	---	Copy of AD card received from Rajeev Thyagarajan.	Annexure-D6
7.	03.02.2023	Copy of 10^thSale notice.	Annexure-D7
8.	---	Copy of postal receipt of sale notice to applicant.	Annexure-D8
9.	---	Copy of AD card received from N.V.Chettiar.	Annexure-D9
10.	---	Copy of AD card received from Manju	Annexure-D10

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SA No.310 of 2023

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11.	---	Copy of AD card received from Thyagarajan Venkitaraman.	Annexure-D11
12.	---	Copy of AD card received from Rajeev Thyagarajan.	Annexure-D12
13.	06.12.2022	Copy of Valuation report.	Annexure-D13
14.	02.02.2023	Copy of Paper publication in Malayalam daily.	Annexure-D14
15.	02.02.2023	Copy of paper publication in English daily.	Annexure-D15

¶90

(Su. WILLYAHM) PRESIDING OFFICER

¶91

Mj/

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Rajeev Thyagarajan v. Hdb Financial Services Ltd.

Case brief

What is this about?

What did the court decide?

Rajeev Thyagarajan v. Hdb Financial Services Ltd.

Case brief

What is this about?

What did the court decide?

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