Dismissed

Harnek Singh v. Sbfc Finance Limited and Others

DRT27 Jun 2025SA/351/2024

Case brief

AI extract

What is this about?

In a securitization application under the SARFAESI Act, the Tribunal dismissed the applicant's plea challenging a possession letter issued under Section 14 without prior Section 13(4) notice, holding legal precedents dispensed with such requirement. Further, the application was dismissed due to the applicant's failure to comply with prior court orders.

What did the court decide?

Securitization Application dismissed; no relief granted to the applicant.

Harnek Singh versus Sbfc Finance Limited and Others — Contract and Commercial Disputes | 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.351/2024

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Date of Institution: 31.08.2024 Date of Decision: 27.06.2025

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Harnek Singh R/oVillage Rania, Post office Sanewal, Jaspal Nagar,Tehsil and District Ludhiana

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-----Applicant

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Versus

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SBFC Finance Ltd., having its Corporate Office at 103, 1^st Floor, C & B Square, Sangam Complex, Andheri Kurla Road, Village Chakala, Andheri (East), Mumabi-400059, Maharashtra, through its Authorized Officer

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SBFC Finance Ltd., Branch Office 2478/4, First Floor, Near Garewal Hospital, Janta Nagar, Gill Road, Ludhiana, through its Authorized Officer

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Reliance Commercial Finance Ltd., Reliance Centre, 6^th Floor, South Wing, off Western Express Highway, Sector Rules East, Mumbai, Maharashtra, India through its Authorized Person

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Reliance Commercial Finance Ltd., at SCO No. 1011, 7^th Floor, Feroze Gandhi Market, Ludhiana, District Ludhiana through its Authorized Person

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Reliance General Insurance Co. Ltd., having its Office at, Surya Tower, the Mall Ludhiana, District Ludhiana through its Authorized Person

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Authum Investment & Infrastructure Limited having its Office at 707, Raheja Centre, Free Press Journal Marg, Nariman Point, Mumbai through its Authorized Person

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The Naib Tehsildar, Ludhiana (South), Tehsil & District Ludhiana --Respondents

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Argued by: Sh.Naresh Kumar Kalia, Advocate for Applicant None for Respondent Nos. 1, 2, 5 & 7 Sh. Vipul Dharmani, Advocate for Respondent Nos. 3, 4 & 6 FINAL ORDER

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2 SA/351/2024 HARNEK SINGH VS. SBFC FINANCE LTD. AND OTHERS

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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 impugned letter dated 26.07.2024 (Annexure A3).

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(2)It was stated in the application that applicant is a resident of Village Rania, Post Office Sahnewal, Jaspal Nagar, Ludhiana; that the property which is the subject matter of the present case is the only residential house of the applicant; that due to adverse circumstances in the business there has been default regarding the payment of the loan amount against the loan account number RFELLUD000381203, which was earlier being operated by the present applicant with Reliance Commercial Finance Ltd.(respondent No.4); that in about May 2018 applicant has took a loan of Rs.30 Lakhs; that due to the default of the above, the applicant has repeatedlyasked the respondent financial institution to give him an opportunity to settle the loan account but respondent has not givena favourable settlement scheme;that the respondent financial institution is only eyeing loan amount and is therefore adamant that they do not want to reach a settlement; that COVID 19 Pandemic had miserably destroyed the economic condition of the applicant drastically; that despite knowing the above circumstances the respondents have not even consider the restructuring of the loan account as has to be adhered by the respondents as per the guidelines issued by the Reserve Bank of India and no waiver has been given as per the guidelines of the RBI for the relevant time period; that still the applicant is having every intention to repay the loan as soon as the business picks up; that earlier applicant was served with the letter dated 17.01.2023 by Naib Tehsildar, Ludhiana (South), which was challenged before this Tribunal by way of an earlier SA No. 53/2023; that now by way of the present SA the applicant is approaching this Tribunal by challenging the current impugned letter dated 26.07.2024 issued by Tehsildar-cum-Executive Magistrate, Ludhiana (South),which is being served upon the applicant; that respondents have not served any notice under section

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SA/351/2024

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HARNEK SINGH VS. SBFC FINANCE LTD. AND OTHERS

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13(4) of the Act before the issuance of the current impugned letter dated 26.07.2024 (Annexure A3), which is the mandate of the Act and is to be followed; that the current impugned proceedings under Section 14 of the Act are execution proceedings of the notice under Section 13(4) of the Act, which is admittedly absent/not-issued in the present case in hand; that in the absence of the notice under Section 13(4) of the Act which is the mandate of the Act to be followed, there is no such document to be executed against the present applicant and in such a case where there is no document to be executed than the execution proceedings of Section 14 of the Act would be illegal to be undertaken by the respondent authorities and the issuance of the impugned letter dated 26.07.2024 under Section 14 of the Act is itself illegal and is therefore liable to be set aside; that further the illegal act of the respondents, whereby the mandatary procedure of the Act has been totally bypassed clearly goes on to show that the respondents are not thinking of the repayment of the loan but are only concentrating on the usurping of the property of the applicant, which is much more in value than the loan amount; that while sanctioning the loan, generally insurance was also made by the insurance company on the asking of lender; that the intention of the applicant was to settle the disputed amount in the loan account of the applicant; that the applicant has also approached the Hon’ble Punjab and Haryana High Court by way of CWP No.7737/2023, whereby the Hon’ble High Court was pleased to grant the interim relief to the applicant in the above mentioned CWP and the same was disposed of by the Hon’ble High Court vide order dated 05.05.2023; that in the above said CWP Hon’ble High Court was granted the liberty to the petitioner for furnishing a demand draft of Rs. 7 Lakhs before thisTribunal to show his bona fide by filing an appropriate application and further subjecting to the same the interim benefit was granted to the applicant; that the applicant was not in such financial condition to bring the demand draft of Rs. 7 Lakhs at the time of filing of the application, which had unfortunately resulted into the dismissal of the above mentioned

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SA/351/2024

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HARNEK SINGH VS. SBFC FINANCE LTD. AND OTHERS

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earlier SA No.53/2023; that the applicant had arranged for an amount of Rs. 7 Lakhs and is ready to settle the loan account with the respondents; that therefore applicant approaching thisTribunal with an innocuous and is hopeful that this Hon’ble Tribunal would come to his rescue and would shower its magnanimity upon the present application to safeguard the only residential house of the applicant so that the family of the applicant could not be on the roadside. It was further submitted that applicant undertakes to abide by the terms and conditions as this Tribunal deems fit to be imposed upon the applicant in pursuance to the settlement of the matter. Therefore, it was prayed that the SA may kindly be allowed.

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(3) Reply filed by respondent Nos. 3, 4 & 6. (4) It was stated in the reply that the present SA is not maintainable in the present form as the same is highly misconceived andapplicant has tried to misconstrue and mis-represent actual facts of the present case, therefore the present application is liable to be dismissed on this short ground alone; that the present SA is not maintainable in the eyes of law as the applicant has already availed the remedy under Section 17 of the Act by filing the SA No.53/2023, which was dismissed vide order dated 16.09.2023 (Annexure A7); that the grounds taken by the applicant in the present SA were also taken in the earlier SA No.53/2023, which already stands dismissed, therefore the present SA is barred on the grounds of res judicata and hence is liable to be dismissed; that the present SA is liable to be dismissed as the applicant is not entitled for any relief, since the applicant has failed to comply with the orders passed by this Tribunal and Hon’ble High Court on three occasions i.e. firstly, the orders passed in the earlier SA No.53/2023; secondly, the order dated 05.05.2023 passed by Hon’ble High Court (Annexure A6) and thirdly, order dated 11.09.2024 passed by this Tribunal in the present SA, wherein the applicant was directed to deposit Demand Draft of Rs.7 Lacs with the FI within one day; that the act and conduct of the applicant makes it manifestly clear that the applicant has no bona fide intention to repay the amount and furthermore, there exist no grounds which may warrant

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interim relief in his favour; that the present SA is without limitation, since the possession notice under Section 13(4) of the Act was issued on 15.12.2021 and the order under Section 14 of the Act was passed on 30.12.2022; that the present SA being filed after inordinate delay of more than about 2 years is barred by law of limitation, having being filed much beyond the limitation period of 45 days; that the present SA is not maintainable in the eyes of the law as the respondents have duly followed all the procedures as envisaged under the Act while initiating proceedings under the said Act and also while undertaking measures as envisaged under Section 13 of the said Act; that the loan account was rightly been classified as ‘NonPerforming Assets’ in strict adherence to the Guidelines and Circulars issued by RBI in this regard and the same is in due consonance with the well-settled prepositions of law; that applicant has filed the present SA acting under mala fide and having been driven with oblique motives and with sole intention to delay the SARFAESI proceedings validly initiated by the respondents to enforce its security interest over the mortgaged property; that applicant Sh. Harnek Singh along with Smt. Ninder Kaur and one M/s Gill Pharmacy (through its Partner- the Applicant Harnek Singh) approached the erstwhile Reliance Commercial Finance Limited i.e., Respondent No. 3 & 4 for availing a loan facility; thatborrowers availed a loan facility to the tune of Rs. 30 Lacs under the loan account bearing No. RLELLUD000381203 videLoan Agreement dated 28.05.2018; that the said Loan Agreement dated 28.05.2018 executed between the borrowers & the Original Lender/Respondent-Financial Institution duly envisaged the terms and conditions therein; that the loan payable as per the stipulations in the said loan agreement by way of monthly installments as per the mutually agreed terms and conditions therein; that the applicant duly mortgaged properties in favour of the respondents by way of equitable mortgage, i.e., deposit of original Title Deeds; that applicant had failed to follow the financial discipline as stipulated in the loan documents and gravely defaulted in the timely repayment of the loan amount as per the terms and

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SA/351/2024 HARNEK SINGH VS. SBFC FINANCE LTD. AND OTHERS

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conditions enshrined in the loan documents; that dueto consistent defaults, the loan account of the applicant was classified as Non-Performing Asset (NPA) on 15.06.2019 in strict adherence to the Guidelines and Circulars issued by the Reserve Bank of India in this regard;that respondent Nos. 1 & 2 issued demand notice dated 02.03.2021 under Section 13(2) of the Act to applicant to pay sum of Rs.42,23,631/- as on 23.02.2021 along with interest accrued thereafter till realization within a period of 60 days from the issuance of the said notice; that the demand notice was duly sent to the borrowers by way of registered post;that despite issuance of the demand notice, the borrowers failed to repay the outstanding dues within the stipulated period therefore, respondent Nos. 1 & 2 issued possession notice dated 15.12.2021 under Section 13(4) of the Act, which was duly served upon the borrowers, including the applicant in due compliance and strict adherence to the provision of the Act and Rules; that the said notice was duly published in two newspapers i.e. ‘The Business Standard’ (English) and ‘Rojan Spokesman’ (Vernacular) dated 18.12.2021, have been wide spread circulated in the area and the notice was also affixed at the conspicuous place of the secured assets; that in pursuance to thepossession notice, secured creditor could not take the physical possession of the property andtherefore duly approached before Additional District Magistrate, Ludhiana by way of an application under Section 14 of the Act and Additional District Magistrate Ludhiana was pleased to allow the said application vide its order dated 30.12.2022 in accordance with law and further issued directions to the concerned Tehsildar to take physical possession of the property/secured assets in question; that the SA Applicant had previously also approached this Tribunal challenging the measure undertaken by the secured creditor under the Act by way of filing SA titled as “Harnek Singh Versus Reliance Commercial Finance Limited and Others’’ bearing SA No.53/2023, wherein this Tribunal vide its order dated 14.03.2023, while hearing the arguments on interim reliefmerely issued notice to the respondents for 15.04.2023; that after being unsuccessful in getting an

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SA/351/2024 HARNEK SINGH VS. SBFC FINANCE LTD. AND OTHERS

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interim order in his favour the applicantapproached Hon’ble Punjab and Haryana High Court by way of filing Civil Writ Petition titled as “Harnek Singh Versus Reliance Commercial Finance Limited and Others’’, bearing CWP No.7737/2023; that the Hon’ble High Court vide its order dated 05.05.2023 by taking into consideration that an amount of Rs.32,29,307/- was outstanding as per the notice dated 08.08.2019, granted liberty to the petitioner to furnish a demand draft of Rs.7,00,000/- before this Tribunal in the earlier SA No.53/2023, which was pending at the said point of time, in order to show his bona fide by way of filing an appropriate application; that it was further ordered that in case of the said demand draft is furnished, the Hon’ble Tribunal may grant interim benefit in favour of the petitioner; that the applicant in violation and willful disobedience to the Hon’ble High Court’s order did not filed any demand draft and thus failed to comply with the said order; that due to noncompliance of the order dated 05.05.2023 passed by Hon’ble High Court and on the basis of the statement of the counsel that he has no instructions from the applicant, was pleased to dismiss the SA No.53/2023 for want of prosecution as well as for default of the applicant; that the applicant acting in mala fide , antics driven with the ulterior motives has again filed the present SA on an alleged premises that he is ready to deposit the amount of Rs.07 Lacs as per order passed by Hon’ble High Court on 05.05.2023; that applicant was trying to take undue benefit of the said order passed by Hon’ble High Court after an inordinate delay of about one and half year; that even otherwise, in the present SA applicant has only stated that he is ready to pay Rs.07 Lacs, which he has failed to deposit through demand draft at the time for filing of the previous SA; that applicant has again failed to comply with the order dated 11.09.2024 passed by this Tribunal in the present SA, wherein the applicant was again directed to deposit demand draft of Rs.7 Lacs with the respondents within one day of passing of the said order; that SA is not maintainable as the entire measures undertaken by the respondents are in due consonance with the provisions of the Act; that applicants are chronic

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8 SA/351/2024 HARNEK SINGH VS. SBFC FINANCE LTD. AND OTHERS

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defaulters and have not made any due payments even after the classification of the loan account as NPA, which is evident from the fact that as on 27.12.2024, a huge amount of Rs. 86,16,554.26pwas outstanding and payable by the borrowers/applicant to the respondents towards the loan account. It was further submitted that the entire plea, which the applicant is trying to take in the present SA is highly misconceived and liable to be outrightly dismissed as per the settled preposition of law. It was prayed that the SA may kindly be dismissed.

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(5) No replication was filed by applicant to the reply filed by respondents.

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(6) No reply filed by respondent Nos. 1, 2, 5 & 7.

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(7) I have heard arguments advanced by Sh. Naresh Kumar Kalia and Sh. Vipul Dharmani, Advocates and gone through the record carefully.

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(8) Sh. Naresh Kumar Kalia, Advocate argued that notice under Section 13(4) of the Act was not served upon applicant but letter issued by Tehsildar South cum Executive Magistrate, Ludhiana in compliance of order passed by ADM, Ludhiana under Section 14 of the Act was served. It was further argued that when the notice under Section 13(4) of the Act was not served upon applicant, then letter issued in compliance of order passed under Section 14 of the Act was not maintainable under the Law.

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(9) Per contra , Sh. Vipul Dharmani, Advocate argued that all the notices were issued strictly in compliance of Rules and in accordance with law. It was further argued that there is no necessity of issuance of notice under Section 13(4) of the Act before moving the application under Section 14 of the Act before the Magistrate concerned for assistance of police for taking the physical possession of the secured asset. (10) It was provided in Section 13(4) of the Act that in case the borrower failed to discharge his liability in full within the period of 60 days specified in Section 13(2) of the Act, the secured creditor may take recourse to one or more of the following measures to recover his secured debt i.e., take possession of the secured assets of the borrower or take over the

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9 SA/351/2024 HARNEK SINGH VS. SBFC FINANCE LTD. AND OTHERS

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management of business of the borrower or appoint any person to manage the secured assets etc.

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(11) Section 14 of the Act provides for assistance by Chief Metropolitan Magistrate or District Magistrate in taking possession of the secured assets. (12) Above provisions shows that any application moved by secured creditor under Section 14 of the Act for assistance of police in taking possession of the secured assets is nothing else but a preparation for taking possession of the secured assets as provided under Section 13(4) of the Act.

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(13) Hon’ble Supreme Court of India in Criminal Appeal No. 1218/2013 with Criminal Appeal No. 1217/2013 decided on 22.08.2013 titled as Standard Chartered Bank Vs. V. Noble Kumar and Others 2014 All SCR 3025 , has discussed and examined Section 14 and Section 13(4) of the Act. It was ordered as under:

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“ 28. It is in the above – mentioned background of the legal frame of Sections 13 & 14, we are required to examine the correctness of the conclusions recorded by the High Court. Having regard to the scheme of the Sections 13 & 14 and the object of the enactment, we do not see any warrant to record the conclusion that it is only after making an unsuccessful attempt to take possession of the secured asset, a secured creditor can approach the Magistrate. No doubt that a secured creditor may initially resort to the procedure under Section 13(4) and on facing resistance, he may still approach the Magistrate under Section 14. But, it is not mandatory for the secured creditor to make attempt to obtain possession on his own before approaching the Magistrate under Section 14. The submission that such a construction would deprive the borrower of a remedy under Section 17 is rooted in a misconception of the scope of Section 17 .” (14) In light of above, there is no substance in the argument of Sh. Naresh Kumar Kalia, Advocate.

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(15) Sh. Naresh Kumar Kalia, Advocate further argued that a fraud was committed by respondents. (16) Per contra , Sh. Vipul Dharmani, Advocate argued that no fraud was committed by respondents

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10 SA/351/2024 HARNEK SINGH VS. SBFC FINANCE LTD. AND OTHERS

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and they have initiated the proceedings under the Act strictly in accordance with law.

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(17) Neither in the application nor during the course of arguments, it was explained as to what type of fraud was committed by respondents. No specific details or facts of fraud were provided in the application neither disclosed during the course of arguments. It was necessary for the applicant to disclose the complete facts of fraud, only thereafter it may be said that the alleged fraud was committed.

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(18) Therefore, it reveals that no fraud was committed by respondents as stated by the applicant. (19) Sh. Naresh Kumar Kalia, Advocate further argued that applicant is ready to settle the matter with respondents but despite of readiness of applicant, respondents are not ready for the settlement/OTS. (20) Settlement of any loan account under OTS or otherwise is the sole prerogative of secured creditor i.e., Bank/FI. Any borrower has no right to compel the secured creditor to settle the loan account under OTS or otherwise.

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(21) During my day-to-day work in the Tribunal, it has came in the knowledge that every second borrower wants for settlement under OTS and not for deposit of total outstanding amount. Since Banks/FIs accepts the OTS proposals at very low amount in comparison to the total outstanding, this ailment is growing on day by day.

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(22) As per established law this Tribunal has no authority for mediation regarding settlement of loan account between borrower and bank/FI.

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(23) In the Act nowhere it is provided that on the ground of non-settlement of loan under OTS by secured creditor this Tribunal can set aside the SARFAESI proceedings. In fact, it is settled law that any borrower cannot claim as a right that OTS proposal submitted by him/her/it must be accepted by the Bank/FI.

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(24) Sh. Vipul Dharmani, Advocate argued that previously, SA No.53/2023 was filed by applicant before this Tribunal and when he has not found any favour from this Tribunal then he has filed CWP No. 7737/2023 before Hon’ble High Court of Punjab and Haryana at Chandigarh and thereafter, applicant has not complied

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11 SA/351/2024

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HARNEK SINGH VS. SBFC FINANCE LTD. AND OTHERS

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with the said order. It was further argued that in terms of the order passed by Hon’ble High Court referred above, applicant cannot claim for any relief in the present SA. It was further argued that applicant is a chronic defaulter and he has failed to comply with the orders passed by Hon’ble High Court as well as this Tribunal. Therefore, applicant is not entitled to get any relief from this Tribunal.

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(25) Per contra , Sh. Naresh Kumar Kalia, Advocate argued that it is admitted fact that applicant has previously filed SA No.53/2023 before this Tribunal but the same was dismissed by this Tribunal. It was further submitted that thereafter, CWP No.7737/2023 was also filed by applicant before Hon’ble High Court of Punjab and Haryana at Chandigarh titled as Harnek Singh Vs. Reliance Commercial Finance Ltd. and Others and order dated 05.05.2023 was passed as the petitioner (applicant of this SA) was directed to furnish a demand draft of Rs.07 Lacs before this Tribunal to show his bona fide by filing appropriate application but this Tribunal vide order dated 24.01.2025 has dismissed his IA for grant of stay of any further course of action regarding the property in question. (26) It revels from record that applicant has failed to comply with the orders passed by this Tribunal as well as order passed by Hon’ble High Court. Orders of Hon’ble Superior Courts must be complied with in letter and spirit at the earliest, even if no time limit was provided in the order. Applicant himself admitted that he has failed to comply with the orders passed by Hon’ble Court in time.

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(27) No reason whatsoever was disclosed by Sh. Naresh Kumar Kalia, Advocate as to why applicant hasnot complied with the orders of Hon’ble High Court as well as this Tribunal. It is settled law that if any party comes before any Tribunal or Court with unclean hands then the said party is not entitled for any relief. All the above facts shows that applicant is not depositing his loan outstanding knowingly and willinglyand only running here and there just to avoid the return of loan. This SA was filed by applicant just to create hurdles in recovery of huge public money.

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(28) After considering all the facts and circumstances and perusing the record available before this Tribunal, it appears that there is no illegality or irregularity in the proceedings initiated under the Act. (29) Certain other facts are mentioned in the application but learned counsel for applicant has not argued on the said facts. Therefore, there is no necessity to adjudicate the same.

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(30) No other point was argued or pressed. (31) After the consideration of all facts and circumstances, there is no case made out in favour of applicant and this SA deserves to be dismissed. SA is dismissed. Record be consigned to record room after due compliance.

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Date: 27.06.2025

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Pronounced by me in the open Tribunal.

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(MRIDULESHKUMARSINGH) Presiding Officer, DRT-III, Chandigarh

Harnek Singh v. Sbfc Finance Limited and Others

Case brief

What is this about?

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Harnek Singh v. Sbfc Finance Limited and Others

Case brief

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