Dismissed

Ms Manav Commission Agent v. Punjab National Bank

DRT22 Jan 2025SA/343/2023

Case brief

AI extract

What is this about?

In this securitization application, the Debt Recovery Tribunal dismissed the challenge filed by borrowers against the bank's enforcement actions under the SARFAESI Act. The court rejected claims regarding illegal loan sanctions, defective notices, and procedural violations, finding the bank's actions lawful.

What did the court decide?

Application dismissed; pending inquiries disposed of.

Ms Manav Commission Agent versus Punjab National Bank — Banking and Recovery | DRT (2025)

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SA No. 343 of 2023

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DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH

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SA No. 343 of 2023 M/s Manav Commission Agents and others Versus Authorized Officer, Punjab National Bank

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22.01.2025 Item No.22

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Argued by: Sh.Rohit Sapra, Counsel for the Applicants.

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Sh.DK Gupta and Ms.Garima Gupta, Counsel for the Respondent Bank.

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M/s Manav Commission Agent, through its proprietor Smt. Reena Nagpal and others (Applicants) have filed this Securitization Application under Section 17 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), against the Authorized Officer, Punjab National Bank (Respondent).

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Admittedly, vide sanction letter dated 06.08.2018 (Annexure A-1), Punjab National Bank (PNB) had sanctioned CC Limit of Rs. 195 lacs to Applicant No.1 against the primary security of hypothecation of stock and collateral security of residential house No. 910/3, B1, Aggarwal Street, Near Gandhi Computer, Jalalabad (West), District Fazilka vide sale-deed No. 954, dated 11.06.1996, measuring 684 sq. ft. with size of 38’ x 18’, in the name of late Shri Rajesh Nagpal and another residential house No. 923, Aggarwal Street, Jalalabad, vide transfer-deed No. 2018-19/57/387, dated 24.05.2018, measuring 1757.50 sq. ft. with size of 38’ x 46.3’ in the name of Applicant No. 2. Late Shri Rajesh Nagpal and Applicant No.2 are the guarantors for the said facility. Applicants have alleged that in fact this loan of Rs. 195 lacs by PNB for its alleged business was only a smokescreen. In fact, the said credit facility was disbursed by the PNB to regularize the irregular loan account of M/s Manav Rice Mills, which otherwise had turned NPA. In fact, this loan was within the financial power of the Branch Manager, who forced the Applicants and Rajesh Nagpal to execute the loan documents in favour of the Bank. It is stated that on 08.08.2018, the

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SA No. 343 of 2023

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DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH

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sanctioned loan of Rs. 1,93,60,000/- was debited to the loan account of M/s Manav Commission Agent and was credited to the loan account of M/s Manav Rice Mills. It is stated that the grandfather of Applicant No.2, namely Harbans Lal Nagpal was the owner of House No. 923, which property was bequeathed to the father of Applicant No.2, namely Rajesh Nagpal by Shri Harbans Lal Nagpal by Will dated 02.02.2018 and thereafter Shri Rajesh Nagpal transferred the same in favour of his son, namely Manav Nagpal, who in turn equitably mortgaged the said property in favour of the Bank to secure the CC Limit of Rs. 195 lacs (Copy of transfer-deed, dated 24.05.2018 in respect of House No.923 is Annexure A- 3). Applicants state that in December 2019, Covid-19 hit the country. On account of this, RBI mandated all the Banks to extend credit facilities to existing borrowers under ECLGS-1 in the form of pre-approved additional WCTL upto 20% of the total outstanding loan. Accordingly, on 11.11.2020, PNB sanctioned WCTL-GECL-1 of Rs. 39 lacs to Applicant No.1. This facility was guarantee free. Consequently, Applicant No. 2 and late Shri Rajesh Nagpal are not labile as guarantors in respect of the said facility (Copy of sanction letter dated 19.10.2020 is Annexure A-5). It is alleged that in the CC account, Respondent Bank has been approximately debiting monthly interest ranging from 1.25 lacs to 2 lacs. However, Applicant No.1 found a debit entry dated 28.02.2021 of Rs. 7,49,693/- towards interest for the period from 01.02.2021 till 28.02.2021, which was admittedly grossly inconsistent with the amount levied in the account earlier towards monthly interest. When the Applicant took the matter with the Bank, they verbally informed that the said debit of Rs. 7,49,693/- is due to down gradation in rating and charging of arrears of interest since 2019 (Copy of the statement of CC Limit w.e.f 01.04.2020 to 31.03.2021 is Annexure A-6). It is stated that the Applicant vide email dated 05.03.2021, enclosed a request letter

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SA No. 343 of 2023

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DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH

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dated 04.03.2021, pointing out that Respondent did not convey the exact confirmed rating and the Branch debited the arrears of interest before the rating was confirmed by the higher authorities of the Bank. The Respondent was requested to reverse the interest arrears of Rs. 7,54,000/- to save the account from slipping into NPA (copy of the email is Annexure A-7). However, Bank failed to pay any heed to the protest. Accordingly, Applicant No. 1 again vide email dated 30.03.2021, enclosed an email to the Bank stating that they were passing through tough time since March 2020 and the burden of Rs. 7.54 lacs will make the account NPA for no fault on their part. The Respondent was requested to charge old rate of interest to enable Applicant No.1 to pay the same (copy of letter dated 30.03.2021 is Annexure A-8). Applicant No. 1 also deposited Rs. 5.45 lacs in the account. On 22.04.2021, Applicant No. 1 requested the Bank to restructure the overdue amount of Rs. 20.24 lacs in CC Limit, to be repaid in 18 EMIs with moratorium period of six months, which was followed by another letter dated 01.06.2021. However, without any result (Copy of letter dated 22.04.2021 is Annexure A-9). It is alleged that in February 2022, Ms. Neha Nagpal daughter of Applicant No. 1 filed a suit for declaration in respect of house No. 923 on the basis of Will dated 06.07.2008 executed by her grandfather Shri Harbans Lal Nagpal in her favour and for declaration that the transfer-deed is illegal, null and void and for possession of the property. Thereafter, PNB in violation of RBI guidelines classified the account of Applicant No.1 as NPA on 31.03.2021. On 14.02.2022, Bank issued the demand notice to Applicant No. 1, demanding a sum of Rs. 2,79,64,508.90p due as on 31.01.2022. Applicant No. 1 filed a representation under Section 13(3A) of the SARFAESI Act (Annexure A-13). On 07.05.2022, Applicant No.1 got a communication dated 05.05.2022 of the Respondent Bank rejecting the representation filed

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SA No. 343 of 2023

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DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH

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by Applicant No.1. Respondent Bank put undue pressure and threatened Rajesh Nagpal of lodging false FIR against him, which caused immense distress and anxiety and this led to his pre-mature death on 21.04.2023. Applicant No. 1 states that she has not received sale notice on 27.10.2023 by registered post, for sale of the property on 17.11.2023. On 01.11.2023, Applicant No. 2 received notice from court receiver stating that the physical possession of the property would be taken on 28.11.2023, in compliance of order dated 30.09.2023 passed by CJM, Fazilka under Section 14 of the Act. On these facts, Applicants filed the present SA alleging that the person who has issued the notice is not the authorized person. They were never informed about the classification of the account as NPA. The declaration of account as NPA was not justified. Further, in the demand notice dated 14.02.2022, it is stated that the account turned NPA on account of nonpayment of installments/interest/principal debt. However, in the application filed under Section 14 of the Act, before CJM, Respondent Bank claims that the account has become NPA due to default in the repayment of the debt. Further, the authorized officer did not serve the demand notice under Section 13(2) of the SARFAESI Act upon Applicant No. 1 and deceased Rajesh Nagpal. On account of non-service of the notice under Section 13(2), Applicant No.1 and Rajesh Nagpal were deprived of their right to file the objections under Section 13(3A) of the SARFAESI Act. Again Bank did not consider the objections filed by Applicant No.1. The objections filed by Applicant No.1 were received by the Bank on 18.04.2022. However, Bank did not dispose of the same within 15 days and decided the same on 15.05.2022, against the provisions of Section 13(3A). Further, the demand notice is vague and it does not disclose the details of amount due. Further, the Bank has charged Rs.7.49 lacs as interest for the month of February 2021. Further, Bank has capitalized penal interest

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SA No. 343 of 2023

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DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH

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against the judgment of the Hon’ble Supreme Court in Ravindra’s case. No notice was given to the Applicants before changing the rate of interest. Further, Applicant No.2 and Rajesh Nagpal had not guaranteed the loan. In fact, Applicant No.2 and Rajesh Nagpal are not the guarantors for the GECL facility. Further, Applicants were not served with the notice under Section 13(4) of the SARFAESI Act. The symbolic possession notice dated 23.05.2022 was not affixed on the property. The possession notice was also not published in the leading newspapers. The affidavit of Shri Ramdayal Chaudhary is not as per law. The CJM did not record his satisfaction while passing the order under Section 14. Further, the Bank also published the demand notice dated 14.02.2022 in the newspapers. This shows that notice under Section 13(2) was not served upon Applicant No. 2 and late Shri Rajesh Nagpal. There was no proper CERSAI of the secured asset as both the properties have not been mentioned in the CERSAI registration. Again the Bank has not obtained proper valuation report from the approved valuer. It is alleged that in the sale notice dated 25.10.2023, the description of the property was not mentioned. Though, there was mention of attachment order of Excise and Taxation Department, yet, it has not been mentioned that the amount due is Rs.1.90 crores. On these broad facts, Applicants filed the present SA on 10.11.2023 wherein they have challenged the whole of the SARFAESI action.

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The authorized officer, in reply to the SA, has denied the case of the Applicants. It is admitted that on 06.08.2018, Applicants had applied for the loan of Rs. 195 lacs, which was sanctioned on 07.08.2018 and Applicants also executed all the relevant loan documents, in favour of the Bank. Applicant No. 2 and Rajesh Nagpal were the guarantors, who had also created security interest in respect of their properties in favour of the

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SA No. 343 of 2023

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DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH

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Bank. Applicant No.1 had again applied for WCTL of Rs. 39 lacs under GECL scheme, which was allowed vide sanction letter dated 19.10.2020 and Applicant No.1 executed all the loan documents on 23.10.2020. On 23.10.2020, Applicant No. 1 and Rajesh Nagpal confirmed that the property already mortgaged in favour of the Bank on 08.08.2018 shall continue to be held with the Bank as additional security. It is stated that there was proper CERSAI registration. The account turned NPA on 31.03.2021. On 05.04.2021, Bank issued the recall notice (Annexure R-4). On 14.02.2022, Bank issued the notice under Section 13(2), demanding a sum of Rs. 2,79,54,508.90p due as on 31.01.2022 (Annexure R-5). The objections filed by Applicant No. 1 on 14.04.2022 were received by the Bank on 18.04.2022. They had responded to the objections on 05.05.2022. The demand notice was also published in ‘Financial Express’ and ‘Daily Chardikalan’, both dated 08.03.2022. Applicants did not make the payment and Bank issued the notice under Section 13(4) on 23.05.2022. The authorized officer visited the property on 23.05.2022 for affixation where Shri Rajesh Nagpal was present alongwith other Applicants. They did not allow the authorized officer to affix the notice on the secured asset. Rajesh Nagpal received the notice for himself and on behalf of other Applicants (Copy of the acknowledgment dated 23.05.2022 is Annexure R-7). The possession notice was sent to the Applicants by post on 26.05.2022 and published in ‘Financial Express’ and ‘Daily Chardikalan’, dated 27.05.2022. On 10.10.2022, Bank got the property valued and put up for auction for 24.11.2022, at the reserve price of Rs.1.90 crores. However, there was no bidder. Bank filed an application under Section 14 before the CJM, who vide order dated 30.09.2023 appointed Shri Paramjit Singh Warval, Advocate as receiver to take the possession of the secured asset. On 16.10.2023, Bank got the fresh valuation and fixed the sale for e-

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SA No. 343 of 2023

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DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH

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auction for 17.11.2023 at reserve price at Rs.1.74 crores. The property could not be sold for want of bidders. Bank has also filed OA No. 738-2022 for the recovery of Rs. 2,70,32,832 due as on 17.10.2021. In substance, Bank has denied the case of the Applicants and submitted that there is no merit in the present SA and the same be dismissed.

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Apart from submitting oral submissions, Mr.Sapra, Counsel for the Applicants has made written submissions. In his written submissions also Mr.Sapra has practically raised the same points which he has pleaded in the SA. Mr.Sapra submitted that in fact Applicant No.1 had never taken the loan of Rs. 195 lacs. In fact, Branch Manager had forced them to execute the documents for this loan and on the day this loan was sanctioned, the money was transferred to the loan account of M/s Manav Rice Mills, which was on the verge of slipping into NPA. Mr.Sapra submitted that in these circumstances, it cannot be said that this loan was actually taken by the Applicants. He further argued that Bank has wrongly debited Rs. 7,49,693/as interest. Applicants had also deposited Rs. 5.54 lacs in March, 2021. The demand notice under Section 13(2) was never served upon Applicant No. 2 and Rajesh Nagpal. Applicant No. 2 is a resident of House No. 923 and is the owner of the property. Even the valuer in his report, dated 16.02.2023 has given a separate postal address of the property. However, Bank dispatched the demand notice at House No. 910/3, which was owned by Rajesh Nagpal. The demand notice was never served upon Applicant No. 2. Bank has also not produced on the record acknowledgment. Mr.Sapra has placed reliance on the judgment of the Hon’ble Delhi High Court in United Commercial Vs. Bhim Sain Makhija 1993(3) PLR (Delhi) 8. In that judgment the Hon’ble Delhi High Court has held that the notice sent by registered post without acknowledgment due is not a valid notice. Bank had

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SA No. 343 of 2023

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DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH

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published the demand notice in two newspapers. This shows that demand notice was not served upon Applicant No. 2 and Rajesh Nagpal. The demand notice was dispatched on 16.02.2022 and it was published on 08.03.2022. The demand notice was not affixed on the conspicuous part of the house. It was published in ‘Financial Express’ only which has no circulation in Jalalabad. As per the annual report of year 2021-2022 of the Registrar of Newspapers of India, ‘Financial Express’ has circulation of 11710 copies. Accordingly, it cannot be said to be a leading newspaper. The demand notice was sent at the wrong address. Further, there was no reason to believe for publishing the notice in the newspapers. Applicant No. 2 and his father Rajesh Nagpal had created security interest in respect of two properties. However, in the demand notice only House No. 910/3 is shown to be as secured asset. In the possession notice, there is no mentioning of House No. 923 of Manav Nagpal. The possession notice was not served upon Applicant No. 2 and was also not affixed on the property. The possession notice was not published in the leading newspapers. House No. 923 is not registered under CERSAI. Bank has wrongly classified the account NPA on 31.03.2021. The WCTL loan of Rs. 39 lacs was not secured by the personal guarantee of Applicant No. 2 and Rajesh Nagpal. The Bank decided the objections filed under Section 13(3A) after 15 days. There is no proof of the communication dated 05.05.2022 that it was ever served upon the Applicants. The demand notice is defective. The order passed by the CJM is also illegal. Mr.Sapra submitted that on these grounds, the SA deserves to be allowed.

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Per contra , Mr.DK Gupta, counsel for the Respondent Bank apart from making oral submissions, has also filed written submissions. In his written submissions, Mr.Gupta has reiterated all those grounds which have

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SA No. 343 of 2023

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DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH

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been setup in the written reply. It has been denied that the notices under Section 13(2) were not served upon Manav Nagpal and deceased Rajesh Nagpal. It has also been denied that the notice under Section 13(4) was not served upon Applicant No.2 and late Rajesh Nagpal. It is stated that on 23.05.2022, the authorized officer had visited the property for affixation of the possession notice where Mr.Rajesh Nagpal alongwith other Applicants were present. However, Rajesh Nagpal did not allow the authorized officer to affix the possession notice on that ground that it will be humiliating for the Applicants. Mr.Gupta has drawn my attention to the acknowledgment (Annexure R-7). The possession notice was sent to the Applicants by registered post on 26.05.2022 and also published in ‘Financial Express and Daily Chardikalan’ (Annexure R-8 and 9). Mr.Gupta submitted that the Bank has also filed OA No. 738-2022 for the recovery of Rs. 2,70,32,821/-. All the notices are legal. Regarding the CERSAI registration, it is stated that there is only one house which has been constructed on two properties. Applicants have alleged that the notice dated 14.02.2022 issued under Section 13(2) was not served upon Applicant No. 2 at house No. 923. It is stated that Applicant No.1 had filed objections. All the Applicants are residing at the same address. The total area of the land on which the house is constructed is 2441.50 sq. ft. There are two title deeds bearing No. 954, dated 11.06.1996 and transfer-deed No. 387, dated 24.05.2018. The location, entrance and gate of this property is common. In the plaint filed by Neha Nagpal daughter of late Rajesh Nagpal before the Civil Court, it is stated that it is a composite residential house, having two sale deeds. In para No. 8 of the plaint, it is also stated that after purchase of the said property Shri Rajesh Nagpal alongwith other applicants got constructed a composite residential house. As per the valuation report dated 16.02.2023, the mortgage property has been constructed on 2441.50 sq. feet, having two

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SA No. 343 of 2023

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DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH

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title deeds. In this SA, Applicants have mentioned their address as house No. 923. However, in SA No. 45 of 2022, titled M/s Manav Rice Mills versus Punjab National Bank, Applicants have mentioned their address as house No. 910. Mr.Gupta submitted that there is no merit in the present SA and the same be dismissed.

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6. I have considered the rival contentions.

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It is admitted on the record that on 06.08.2018, PNB had sanctioned a CC Limit of Rs. 195 lacs to Applicant No.1. Applicant No. 2 (Manav Nagpal) and late Shri Rajesh Nagpal stood guarantors. To secure the same, Applicant No. 2 and late Shri Rajesh Nagpal had created equitable mortgage of their property by depositing two title deeds, in favour of the Bank. I am of the considered view that there is no force in the contention of Mr.Sapra, counsel for the Applicants that the Branch Manager had forced the Applicants to avail the loan. Applicants had signed the documents and deposited their title deeds. In these circumstances, Applicants cannot be heard to say that they were forced to avail this loan. I am of the considered view also that there is no force in the contention of Mr.Sapra that there was no proper CERSAI registration in this case. As per the Bank, the house has been constructed on 2441.50 sq. feet and there is one entrance to the same. Applicants have filed SA No. 45 of 2022, titled as M/s Manav Rice Mills versus Punjab National Bank, wherein they have mentioned their address as residents of House No. 910. This shows that there is only one house and all the Applicants are residing there. The sister of Applicant No.2 Ms.Neha Nagpal in her plaint has alleged that the house exists on joint land.

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I am of the considered view that there is no force in the contention of Mr.Sapra that the notices under Section 13(2) and 13(4) were not served upon Applicant No. 2 and late Rajesh Nagpal. The authorized officer has

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SA No. 343 of 2023

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DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH

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categorically mentioned that he had visited the property on 23.05.2022 where Rajesh Nagpal and other Applicants met him and Rajesh Nagpal had collected the notices on his behalf and on behalf of other Applicants. Bank has also filed OA against the Applicants for the recovery of money. I am of the considered view that there is no force in any of the contentions of Mr.Sapra. There is no merit in the present SA. The same is hereby by dismissed . All the pending IAs, if any, are also disposed of, accordingly.

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Registrar is directed to send a copy of this order to all the parties, as per rule. Thereafter, file be consigned to record room after due compliance.

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(A S Narang) Presiding Officer Pronounced in open court. DRT-I, Chandigarh Manoj/Dated: 22.01.2025

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Ms Manav Commission Agent v. Punjab National Bank

Case brief

What is this about?

What did the court decide?

Ms Manav Commission Agent v. Punjab National Bank

Case brief

What is this about?

What did the court decide?

What the court decided

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