Allowed

Ms Sheetal Copy Udyog v. Central Bank of India

DRT14 Jul 2025SA/313/2024

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal quashed a SARFAESI auction and sale certificate due to procedural irregularities including defective notice service, document discrepancies, and inadequate sale price. The bank was ordered to refund the auction amount with interest and return possession to the borrower, while compensating the auction purchaser for dissatisfaction if possession is not returned promptly.

What did the court decide?

SARFAESI action and auction sale quashed; Bank to refund auction amount with 10% interest upon return of possession to borrower; Bank to pay daily compensation for refund delay.

Ms Sheetal Copy Udyog versus Central Bank of India — Banking and Recovery | DRT (2025)

SA 313 of 2024 [JI

ORT. PATNA

DEBTSRECOVERYTRIBUNALPATNA

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PresidingOfficer:Shri Kaushalendra Yadav

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SA-313of 2024

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MIs Sheetal Copy Udyog, through its proprietrix- Smt. Seema Devi, Situated at Simli Nawabganj, Post Madhav Mill, Near Mahavir Mandir, Nagla, Patna City, P.S. - Chowk, District - Patna, Pin 800008 (Proprietary firm).

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Smt. Seema Devi, W/o - Sri Ranjan Kumar, RIo - Simli Nawabganj, Post Madhav Mill, Near Mahavir Mandir, Nagla, Patna City, P.S Chowk, District - Patna, Pin 800008 (Proprietrix).

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Sri Arun Kumar Singh @ Arun Kumar @ Sri Arun Singh, S/o - Late Jagdish Singh, Resident at Mohammadpur, Kothiya, Didarganj, P.S. - Malsalami, District - Patna - 800009 (mortgagor).

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Sri Kunal Singh, S/o - Sri Vishwanath Singh, Residing at Mohammadpur, Kothiya, Didarganj, P.S. - Malsalami, District - Patna800009 (Guarantor).

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. Applicant

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Versus

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The Authorized Officer Central Bank of India, Lohia Nagar Branch, Police Station - Kankarbagh, Town & District - Patna 800020.

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Sri Kaushal Ray, S/o - Sri Nageshwar Ray, Kanti Factory Road, Mahatma Gandhi Nagar, Near Shiv Mandir, M.G. Nagar, B.H. Colony District - Patna, Bihar - 800026. (Auction Purchaser).

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Sri Rohit Dubey, S/o - Sri Shivlok Dubey, B-403, Prasad Apartment, Kalimandir Road, Near Shiv Nagar, M.G. Nagar Hanuman Nagar, Kankarbagh, Sampatchak, Lohia Nagar, District - Patna, Bihar - 800026 (Auction Purchaser).

--respondents

Present:

For the Applicant

For the Respondent Bank

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:Dr.BinayKr. Singh,Advocate

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: Sh.SureshMishra,Advocate

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.' .

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SA 313 of 2024 IJI

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ORT. PATNA

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For the Respondent No.2

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For the Respondent No.3

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Dated: 14.07.2025

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: Sh.ArvindKumar,Advocate

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: Sh.ManoranjanKr. Mishra,Advocate

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JUDGMENT

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Present application has been filed with a prayer to quash entire SARFAESI action taken against the properties of applicant along with the auction sale as well as Sale Certificate dated 10.10.2024 issued by the respondent bank.

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During pendency of the SA, the applicant filed an IA 713/2024 with the prayer to direct the auction purchaser from further construction over the property.

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Further, IA 87/2025 has been filed by the Bank of Baroda with the prayer to implead the Bank as Respondent in the matter as the property in question was also mortgaged with the Bank of Baroda.

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The brief fact of the case is that the applicants availed various credit facilities from the respondent bank and mortgaged the property towards security of the loan. Due to default in repayment of dues of the bank, the accounts were classified as NPA on 30.03.2023. Subsequently, the respondent bank initiated SARFAESI action against the borrower by issuing Demand Notice dated 16.08.2023 u/s 13(2) of the act calling upon the borrower to make the payment of Rs.61,28,7411- plus interest. Thereafter, the respondent took possession of the property by issuing Possession Notice dated 06.06.2024 uls 13(4) of the SARFAESI Act. Further, the respondent bank put the property on auction sale by publishing an auction sale notice dated 22.08.2024 fixing the date of auction sale on 25.09.2024. Accordingly, property has been auctioned and sold to the respondent no. 2 & 3 (auction purchaser) for Rs.2,82,75,781/-. Further, the respondent issued a Sale Certificate in favour of the auction purchaser on 18.10.2024 and also delivered the physical possession of the property to the auction purchaser. Aggrieved from the auction sale and sale certificate, present SA has been filed by the applicants.

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It is submitted by the Ld. Counsel of applicant that due to surge of Covid-19 could not deposit the dues of the Bank regularly. The respondent bank without serving the Demand Notice as well as possessi~~ce, directly r-h

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SA 313 of 2024 [JI

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DRT, PATNA

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affixed the Possession Notice dated 03.02.2024 on the property. In absence of Demand Notice, the applicants could not submit its objection U/S l3(3-A) and know the date of NPA. As per guidelines of RBI as well as order of Hon'ble Apex Court, before classification the accounts of MSMEs as NPA, the Banks are mandatorily to assist the beleaguered units under the Corrective Action plan or Revival and Rehabilitation of unit. But in the instant case, the respondent Bank ignored the circular of RBI as well as notification of Ministry of MSMEs, Govt. of India and the judgment passed by Hon'ble Apex Court on 01.08.2024. The respondent Bank without complying with the mandatory provision under Rule 8(6), sold the entire property worth Rs.6 Crores on grossly inadequate price of Rs.2,82,75,7811whereas only 2 Katha of land was sufficient for liquidation of account. The sale notice was also not published in two leading newspapers and affixed on secured assets. The auction purchaser has also not deposited the auction amount within time.

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On the contrary, Id. Counsel of the respondent bank submits that apart from the loan availed by the applicant no.1 through its proprietor. The applicant no.4 has also a loan facility from the respondent Bank in which the applicant is mortgagor/guarantor, was also classified as NPA. It is further submitted that the borrower after availing the loan facilities, failed to pay the dues of the bank. Thereafter, the respondent Bank sent a legal notice dated 30.01.2023 to the applicant no. 2 to 4 to make payment of outstanding dues of the Bank but the applicants failed to deposit the outstanding dues. Hence, the accounts were classified as NPA. In order to recover outstanding dues the respondent bank initiated SARFAESI Action against the borrower & guarantors by issuing Demand Notice dated 16.08.2023 U/S 13(2) of the act. The said demand notice was sent to the applicant through registered post on 19.08.2023. Since, the borrower failed to repay the dues of the bank even after serving Demand Notice, therefore, the respondent bank took possession of the property by issuing Possession Notice dated 06.06.2024 U/S 13(4) of the SARFAESI Act. The said possession notice was served to the applicants through post on 07.06.2024. The Possession Notice was affixed on secured assets and also published in 'Hindustan' and 'Indian Express' on 09.06.2024. Thereafter, respondent Bank obtained the valuation of the property ~ ,.,:

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SA 313 of 2024 IJI

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ORT. PATNA

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accordingly, the reserve price had been fixed for auction sale of the property and steps for auction sale had been taken. Prior to fixing the date of auction sale of the property, the respondent Bank sent a 30 day's notice to the borrowers to redeem the property, failing which the Bank will auction sale the property. Since, no steps have been taken by the borrowers, therefore, the property was put on auction sale by issuing auction sale notice dated 08.08.2024. The said sale notice was affixed on the secured asset and also sent to the applicants through post. The sale notice was also published in 'Hindustan' and 'Hindustan Times' on 24.08.2024. The property was auctioned on 25.09.2024 to the highest bidder with an amount of Rs.2,82,75,7811-. The auction purchaser deposited the 25% amount within time. Hence, the Sale Intimation letter dated 26.09.2025 has been issued to the auction purchaser. On payment of the rest amount, Sale Certificate has also been issued in favour of the auction purchaser on 18.10.2024 and physical possession of the property has been delivered to the auction purchaser.

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It is submitted by the ld. Counsel of the auction purchasers that after getting information from the publication of sale notice on 24.08.2024 in the newspaper, the auction purchasers bonafidely participated in the auction sale held on 25.09.2024 against the sale notice dated 22.08.2024 for the property in question and was declared successful bidder with the bid amount of Rs.2,82,75,781/-. Accordingly, the auction purchaser deposited 25% of the auction amount within time therefore, the respondent bank issued a sale confirmation letter dated 26.09.2024. Further rest 75% of the auction amount was also deposited by the auction purchaser accordingly, sale certificate was issued by the auction purchaser on 18.10.2024 and physical possession of the property was handed over to the auction purchaser. There is no violation either on the part of the Bank or on the part of the auction purchaser. Hence, the present SA may be dismissed.

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I have heard Ld. Counsel for the parties and gone through the record.

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It has been alleged that the respondent bank without serving the Demand Notice as well as Possession Notice, directly affixed the Possession Notice dated 03.02.2024 on the property. Due to non service of Demand Notice, the »: ,.,\

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t. ~

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SA 313 of 2024 PI

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DRT,PATNA

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applicants could not submit its objection uls l3(3-A). The guidelines of RBI as well as order of Hon'ble Apex Court, regarding classification of the accounts as NPA of MSMEs account has not been followed for correcting Action plan or Revival and Rehabilitation of unit. It is also alleged, without complying with the mandatory provision under Rule 8(6), sold the entire property at an inadequate price Rs.2,82,75,781/- whereas only 2 Katha of land was sufficient for liquidation of account. It is also alleged the sale notice was neither affixed on secured assets nor published newspapers. The auction purchaser has also not deposited the auction amount within time.

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On perusal of records it appears that the applicant failed to pay the dues of the bank regularly due to surge of Covid-19 therefore, the account was declared as NPA. In order to recover the dues, the respondent Bank issued Demand Notice dated 16.08.2023 and the same was sent to applicant no. I & 2 through post on 19.08.2023 as evident from the postal receipt annexed with a counter affidavit as annexure - F, page 54. No proof of service of Demand Notice to applicant no. 3 & 4 has been filed by the bank. Moreover, on perusal of said demand notice, it appears that it has only been issued in favour of Shital Copy Udyog, Prop. Smt. Seema Devi whereas property exists in the name of applicant no.3.

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Further, possession notice dated 06.06.2024 was issued by the Bank and the same was sent to applicant no. I, 2 & 4 through post on 07.06.2024 as evident from the postal receipt annexed with a counter affidavit as annexure - G, page 56. No proof of service of Possession Notice to applicant no. 3 has been filed by the bank. Apart from the annexure -G, page 56 indicates that the possession notice was sent to one Govinda Kumar Singh but neither the applicant nor the respondent Bank disclosed the status of Govinda Kumar Singh in the loan account in question. The possession notice was affixed on the secured asset as also admitted by the applicant in its application. The possession notice was also published in 'Hindustan' and 'Indian Express' on 09.06.2024.

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Thereafter, the property was put on auction sale vide sale notice dated 08.08.2024 as stated/claimed by the respondent Bank in its counter affidavit but 01) perusal of said notice as annexed as annexure - H, page 63 indicates

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SA313 of 2024 III

DRT, PATNA

that no date of sale has been mentioned in the sale notice. Apart from this, in the 1st para of the said sale notice date of NPA has been mentioned as 31.12.2019 whereas in the Demand Notice the date of NPA has been mentioned as 30.03.2023. Further, in the 2 nd para of the said sale notice the Demand Notice has refereed as of dated 06.12.2019 while the annexure -F, page 51 of counter affidavit shows the Demand Notice was issued on 16.08.2023.

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The respondent Bank also failed to file the proof of service of sale notice to the applicants. Annexure - H, page 65, 67 filed with counter affidavit indicates that the sale notice dated 22.08.2024 was published in Hindustan and Hindustan Time on 24.08.2024 and also indicates that the date of sale has been fixed 25.09.2024. But neither the applicant in its application nor the respondent Bank in its counter affidavit stated regarding auction sale notice dated 22.08.2024. No proof of service either of sale notice dated 08.08.2024 or of dated 22.08.2024 filed by the respondent Bank. The respondent Bank also failed to file proof of affixation whereas it is specifically alleged that the sale notice was not affixed on the secured asset.

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The respondent Bank also failed to file a valuation report to controvert the allegation of applicants that the property has been sold on inadequate price. It is also not replied by the Bank why the entire property has been sold whereas applicant claims that the only 2 Katha of land was sufficient to liquidate the account as the property plain land.

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However, Annexure - I, page 68 of counter affidavit shows that the property was auctioned on 25.09.2024 to the auction purchaser herein respondent no. 2 & 3 for an amount of Rs.2,82,75,781/- but neither the respondent Bank nor the auction purchaser stated in its counter affidavit regarding detail of payment made by auction purchaser nor filed any documents showing the details of payment made in this regard to controvert the allegation of applicant that the auction purchaser did not deposit the amount within time.

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13.In view of the above discussion, each and every notice issued under SARFAESI act suffers from the discrepancy and also suffers from the deficiency in services to the borrower as well as guarantor/mortgagor. It

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SA 313 of 2024 [J)

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DRT,PATNA

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appears that the respondent Bank has either taken the SARFAESI Action against the applicant in a very negligent manner, or it has been negligent in filing relevant evidence in the present SA as defence. Hence, the present application succeeds. The applicant is also entitled for compensation as the possession has also been taken in pursuant of aforesaid defective illegal and irregular SARFAESI Action against the applicants.

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ORDER

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The application SA 313 of 2024, is allowed with costs. The SARFAESI Action in question against applicants, including auction sale 25.09.2024 is hereby quashed. The respondent Bank shall refund the amount deposited by the auction purchaser with 10% simple interest, subject to the condition that the auction purchaser will hand over the vacant possession of the mortgaged property within one month from the date when the amount for refund is tendered by the respondent Bank. Thereafter the respondent Bank will hand over the possession of the property to the applicant. No interest will be payable to the auction purchaser, if the possession is not handed over to the bank within one month from the date of tender of the refund. The respondent Bank will be liable to pay compensation @ Rs.I 000 per day if the amount is not offered for refund to the auction purchaser within 30 days from the date of this order.

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Presiding Officer

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Debts Recovery Tribunal, Patna

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Judgment signed, sealed, dated and pronounced in the open court on~_j.t 14TIlDay of July, 2025. /'

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on~j.t /
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[KaushalendraYadav]

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Presiding Officer

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Debts Recovery Tribunal, Patna

Ms Sheetal Copy Udyog v. Central Bank of India

Case brief

What is this about?

What did the court decide?

Ms Sheetal Copy Udyog v. Central Bank of India

Case brief

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