Allowed

Neelam Mittal v. State Bank of India

DRT26 Nov 2025SA/437/2023

Case brief

AI extract

What is this about?

The Tribunal set aside SBI's SARFAESI action against applicant guarantors. It held the NPA declaration violated RBI guidelines due to incorrect default period calculation and impermissible declaration during CIRP. The notice also breached Section 13(3) by omitting amount bifurcation.

What did the court decide?

The application is allowed; all actions by the Bank, including NPA declaration, demand notices, possession, and sale notice, are set aside.

Neelam Mittal versus State Bank of India — Cheque Dishonour | DRT (2025)

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Debts Recovera Tribuna!-Il, Delhi

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SA No.437 OF 2023

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MRS. NEEI-AM MITTAL & OTHERS Vs STATE BANK OF INDIA AND OTHERS

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Reserued on: 13.11.2025 Pronounced on:. 26.1L.2025

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Present: Shri Amit Dhall, counsel for applicants. Shri Amrendra Kumar Singh, counsel for respondent bank.

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This SA has been filed by the applicant against the respondent bank under Section 17(1) of the SARFEASI Act,2002 with the request that the action and measures initiated by the respondent bank in respect of the properties bearing no. (i) all part and parcel of commercial building, unit No.34, bearing MCD No.6/51, Block.III, known as Tribhuvan Complex, comprised in khasra No.l723ll705l263, Min, L7241L7071262, min and 264 min. situated at Ishwar Nagar, Village Bahapur, Tenth milestone, Mathura Road, New Delhi-110065, total area 882.2L 5q.Ft.(81.96 Sq.Mtrs.) as^per sale deed, wasika No.574, dated 18.01.2010 in the name of Smt. Neelam Mittal, wife of Sh. Jatinder Mittal and bounded as under:east: unit no.33, west unit no.35, nofth: other^property, south: road & entry (ii) all^part and^parcel of commercial building, unit no.35, bearing MCD No.6/51, Block.lll, known as Tribhwan Complex, comprised in khasra No.17231L7051263, Min, 17241L7071262, min and 264 min. situated at Ishwar Nagar, Village Bahapur, Tenth milestone, Mathura Road, New Delhi-110065, total area 882.21 sq. ft.(81.96 sq. mtrs.) as per sale deed, wasika No.675, dated 18.01.2010 in the name of Smt. Neelam Mittal, bounded as under:- east: unit no.34, west unit no.36, north: passage and south: road & entry (iii) all part and parcel of commercial building, unit no.36, bearing MCD No.6/51, Block.III, known as Tribhuvan <-\

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Complex, comprised in khasra^{no.L7231L7051263,} Min, L7241t7071262, min and 264 min. situated at^Ishwar Nagar, Village Bahapur, Tenth milestone, Mathura^Road, New Delhi-110065, total area 882.21 sq. ft.(81.96^sq. mtrs.) as^per sale deed, wasika No.673, dated^18.01.2010 in the name of Smt. Neelam Mittal, bounded as under:^- east: unit no.35, west unit no.37, noflft: other unit^and south: road & entry, (iv) House No.630, Sector^8, Panchkula, (v) House No.601, Sector 6,^{Panchkula and} (vi) Residential HIG Flat No. 1464, Ground floor, Sector 43, Chandigarh be declared illegal and arbitrary^and quash the same.

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The brief facts of the application are that as^per application, the applicant is^preferring the^presentS4 impugning/assailing the^purported action(s)^and measure(s) initiated and threatened to^{be initiated by the} respondent bank by allegedly invoking the^{provisions of} the SARFAESI Act, 2002 including but not limited^{to the} notices dated 08.12.2023 and 23.11.2023 allegedly^issued under Section 13(4) of the Securitization^{Ac..,2002 as also} the alleged demand raised^purportedly under^Section 13(2) of the Act, dated 26.05.2022, by the^respondents which have put the applicants under the constant threat of being illegally^physically evicted from the^propertiesin question and sell the same without adhering to the provisions of the Act. It is submitted that Section 13 (1) of the Securitization Act specifically and categorically declares the^provisions of the SARFAESI Act to^be applicable only on the propefi on which a security interest has been created in favour of the secured creditor. It is submifted that it has been a well settled proposition of law laid down by the Hon'ble Apex Couft in the matter of Mardia Chemicals Ltd.Vs. Union of India in respect of the asset classificatial_of the account as NPA €J,

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and in relation to the measures which are mandatory to be complied with by the respondent/secured creditor under Section 13 (4) of the Securitisation Act is^propounded by the law laid down by the Hon'ble Apex Court in the matter of Ram Kishun Vs. State of Uttar Pradesh and J. Rajeev Subramaniam Vs. M/s.Pandiyas and others which also specifies that the Chapter^zl-A of Securitisation Act, 2002 includes Section 26-8 to Section 26-E of the Seuritisation Act where the right of the secured creditor to enforce the securities is provided read with Rule 8 of the Security Interest (Enforcement) Rules, 2002. It is submitted that the purported actions and measures taken by the respondents purpoftedly taken under Section 13(4) of the SARFAESI Act, 2002 together with the impugned^possession notices dated f8.10.2023 and 08.L2.2023,^qua the^propertiesin question and as well as the impugned notice under Section 13(2) of the Securitisation Act issued by the respondents, are de-hors the SARFAESI Act, 2002. It is submitted that the respondent bank has issued the^letter of renewal and enhancement of the working^capital facility to the respondent no.3 company on 08.03.2017, on the basis of the financial discipline which was being maintained by the respondent no.3 as^per the sanctioned norms. It is submifted that the respondent no.3 company had been operating the account regularly with the respondent no.1 bank and had^paid the interest with the respondent no.1 up till 30.09.2019 and has also made the payment to the respondent bank on 04.10.2019 an amount of Rs.2 Crores. the respondent no.1 had^granted the credit facility to the principal borrower i.e. the respondent no.3 which is under CNP^{process pursuant} to the orders passed by the Hon'ble NCLT, Chandigarh. It is submitted that the respondq4tlo.l had lastly sanctioned 9,\

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on 16.04.2019 the credit facilities to the respondent no.3, which had been fund base facility of Rs.30 crores, term {oan of Rs.6.50 crores, Non fund base facility of Rs.50 crores. It is submitted that the applicant had been operating the account within the sanctioned norms and the respondent bank was requested on numerous occasions regarding various entries which were being debited by the respondent bank in the account of the applicant no.2 from time to time. It is submitted that there had been various instances that the respondent bank was requested that unnecessarily the respondent bank is debiting the excessive interest and the charges in the account which were not^permissible and the bank was not authorized to do so, because of which there were ceftain irregularities in the account of the applicants. It is submitted that the provisions of the SARFEASI Act, 2002 can only be inwked if the account of the borrower has been declared as NPA by the respondents for which the respondents have to follow the guidelines framed by the RBL IT is submitted that on the basis of wrongful classification of the account as NPA, the respondent bank cannot be permitted to initiate the measures under Section 13 (4) of the Securitisation Act which is in^gross violation of the guidelines laid down by the RBI since July, 2009 in para 2.1.6 and in para 2.1.3 of guidelines laid down by the RBI in October,2021 and para 4 of the RBI guidelines dated 12.11.2021. The Ld. Counsel for the applicants has relied upon the^judgement of Hon'ble Apex Couft in the matter of Keshav Lal Khem Chand & Sons hlt. Ltd. V/s. Union of India, wherein the Hontle Apex Couft has held that before the classification of the account as NPA, the creditors are required to consider that in case if parameters which are adopted in relation to the procedure, practice ingluding master guidelines laid

SAno.437 of2023

the down by RBI. It is submitted that respondent no.3 company went into CRIP^process pursuant to the order passed by the Hon'ble NCLT, Chandigarh upon an application filed under Section 9 of the Insolvency & Bankruptcy Code, 2016 and whereby the Insolvency Petition filed by the Operational Creditor against the respondent no.1 being the Corporate^Debtor was admitted. It is submitted that consequent upon the orders^passed by the Hon'ble NCLT, Chandigarh, dated 07.10.2019, Sh. Mandeep Gujral, had been appointed as the Resolution Professional, who has been completely managing the afhirs of the respondent no.3 and^is involved into the day to day activities of the^respondent no.3 company including the operation of the account^with the respondent no.1 bank as well as the^business activities which are being carried on. It is submifted that the respondent no.1, during the currency of the CIRP process which had been pending, thus issued the notice under Section 13 (2) of the Securitisation^Act, demanding an alleged amount of Rs.75,49,67,042.42. It^is submitted that by way of representation dated 10.12.2020, the applicant had submitted the representation under Section 13 (3) (a) of the Securitisation Act, read with Rule 3(a) of the Security Interest (Enforcement) Rules, 2002. It^is submitted that by way of communication dated 23.L2.2020, the respondent no.1 had withdrawn the statutory demand notice issued under Section 13⁽²⁾ of the SARFAESI Act dated 12.10.2020. The respondent bank on 14.t2.2020 had already issued the fresh demand notice under Section 13 (2) of the SARFAESI Act, wherein demanding the alleged amount of Rs.34,55,88,924.77 as on 30.12.2020 and claiming that the account stands classified as NPA on 31.12.2019. It is submifted that the applicant, by way of representalion dated 08.02.2021, sJ,^,

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requested the respondent no.1 to consider the representation in the light of the mandatory^provisions of the Securitisation Act. It is submitted that the respondent no.l bank initiated the measures under Section 13 (4) of the SecuritisaUon Act in respect of the^properties which are the subject matter of the SA. The applicants had filed the Writ Petition before the Hon'ble High Court of Punjab & Haryana at Chandigarh, bearing OA/(P)^No.5059/22, which came up for hearing on 23.03.2022 and the Hon'ble High Court had been^pleased to restrain the respondent bank from taking any coercive action. It is submitted that the applicant no.l had filed the SA no.21212022 and^this Hon'ble Tribunal had been^pleased to^pass an appropriate order on 09.05.2022. Thereafter, the respondent^bank had issued the letter and filed an application that the measures initiated by the respondent bank had been withdrawn including the demand notice issued^under Section 13 (2) of the Securitisation^{Act and, therefore,the} SA and the other^proceedings were disposed of. It^is submitted that the respondent bank issued fresh demand notice under Section 13(2) of the Securitisation Act dated 26.05.2022, wherein allegedly demanding an amount of Rs.35,98,49,496.14 as on 28.12.2019 and claiming that the account of the respondent no.3,^principal borrower company, has been classified as NPA on^{28.12.2019.On} receipt of the notice under Section 13(2) of the Securitisation Act, the applicants submitted^the representation to the respondent ban( by way of communication dated 22.07.2022.It is submitted that the authorized officer of the respondent bank was required to consider that the RBI^guidelines are required to be complied with in case the account is required to be classified as NPA and as on 04.10.2019, the account was absolutely regular and there were no over dues in the

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SAno.437 of2023

account. The respondent bank even failed to adhere to the provisions of Section 13(3XA) of the SARFAESI Act, 2002 and Rule 3(A) of the Security Interest (Enforcement) Rules, 2002 as the Bank failed to consider the representationlreplyl objections sent by the applicant to the respondent bank in reply/objection to the^purported notice under Section 13(2) of the SARFAESI Act, 2002 before proceeding to initiate measures under Section 13(4) of the SARFAESI Act, 2002 i.e. issuance of impugned possession notice. It is submitted that the respondent bank, by way of communication dated L6.08.2022, has rejected the representation of the applicants and claiming that the account of the respondent No.3, principal borrower company has been classified as NPA on 28.L2.2019, as per the RBI guidelines. The Ld. Counsel for the applicant has relied upon the^judgment of the Hon'ble Apex Court in the matter of Keshav Lal Khem Chand Vs. Union of India wherein it has been held that the uniformity has to be maintained by the nationalized bank for the^purpose of classification of the account as NPA and as such the entire process, which has been adopted by the respondent bank to classiff the account as NPA is contrary to the RBI guidelines and therefore, the measures which have been invoked by the respondent bank under Section 13(4) of the Securitisation Act are liable to be stayed. Thereafter, the respondent bank has issued the notice under Section 13(4) of the Securitisation Act read with Rule 8(1) of the Security Interest (Enforcement) Rules, 2002, in respect of the^properties owned by the applicant nos. 2, 3 & 4. It is submitted that the respondent no.l thus made the due non compliance of the provisions of Rule 8(2) of the Security Interest (Enforcement) Rules, 2002, as the respondent no.l was requirg( to_publish the possession 9)

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notice, as referred in sub rule (i) as soon as^possible but not in any case, later than 7 days from the date of taking the possession in the two leading newspapers, one in vernacular language, having the sufficient circulationⁱⁿ that locality, by the officer. It is submitted that all the notices under these Rules were required to be^served upon the borrower through electronic^mode of^seruice,in addition to the mode^{prescribed undersub Rule 1 and sub} Rule 2 of Rule 8 and whereas the^{respondentno.1 has} not compliryl with the^provisions of^{Rule 8(1) and 8(2) of} the Security Interest^{(Enforcement)Rules, 2002 and thus} the entire measures initiated^{and adopted by the} respondent no.l bank^{pursuantto the notice is in gross} violation of the Act. Further,^{the respondenthas} deliberately violated^Rule 8^{as the bank has not givenall} the proper details about the^{property and/or the known} encumbrances and also^{not disclosed all the material facts} which relevant, one such most^{relevant information in} respect of the^property in^{question. It is submitted that} the non-compliance of^{statutory provisions of the} SARFAESI Act i.e. Rule 3(4), 8(2)^{and violation of Section} 13(3A), Rule 3A of the Security^{Interest Enforcement} Rules is a^grave violation of^{the principles of natural} justice and equity and all the measures and acts adopted by the respondent bank^{are liable to be declared as nullis-} juris and void ab-initio. It is submitted that the applicant no.3 had submitted the application^{under RTI Act to the} respondent no.1 for seeking ceftain^{information. It is} submitted that the respondent^{No.1 bank without} considering the facts had denied to^{provide the} information by way of communication^{dated 10.11.2023.} Thereafter, the respondent bank^{has issued the notice} dated 23.11.2023 for^pufting the^{three properties on} auction, owned by the applicant^nos. 2, 3^{& 4' It is}

SAno.437 of2023

submittd that the respondent bank vide letter dt. 6.L2.2203 had withdrawn the sale notice dt. 23.Lt.2023.It is submitted that the respondent bank^has issued the impugned sale notice dt.7.L2.2023 whereⁱⁿ putting the two properties in question for auction. It is submitted that the respondent bank has^{published the} sale noUce in news^paper dt. 13.12.2023.It^{is submitted} that the sale noUce datd^{7.L2.2023 is absolutely contrary} to Rule 8(5) and 8(5) of the^{Security Interest} (Enforcement) Rules, 2002, therefore, the entire^process which has been adopted by^{the respondent ban(} pursuant to the impugned sale notice dated^{7.L2-2023, is} contrary to the^{provisionsof the SARFAESI Act, 2002 and} is thus liable to be^{stayedand set aside. It is submitted} that the sale notice datd^{7.L2.2023, in respect of the} property in question owned by the^{applicantno.2} mentioned at Sl. no.l of the^{impugned sale noticedated} 07.12.2023, is contrary to^{Rule 8(7) of the Security} interest^{(Enforcement)Rules, 2002, therefore,the process} adopted by the^{respondentbank is contraryto law and is} thus liable to be^{stayed/ set aside' It is submittedthat the} respondent no.3^{companyis undergoingthe CIRP process} pursuant to the order^{passed by the Hon'bleNCLT,} Chandigarh and^{the resolution plan has been approved by} the Hon'ble NCLT^{vide order dated 23.08.2023'The} resolution^{plan has been duly approved by the committee} of creditors, in^{which the respondent no'l bank is one of} the creditors.^{It is submitted that the respondent bank} has received an^{amount of Rs.2.Crores approximatelyby} encashment of^{LIC policiesand other bonds andhas} further received an^{amount of Rs.7,83,91,883/- towards} realization from^{the STDR. It is submitted that the} respondent bank^{has wrongly classifiedthe accountas} NPA which is self^{evident- from the email sent by the}

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SAno.437 of2023

respondent bank on 16.08.2019 and including the snap shot taken by the applicants online, the status of the account. It is submitted that the Central^mechanism platform, which is available for creating any charge in favour of the secured creditor, is required to^{be registered} so that the compliance of the^{same is done and the} provisions of Section 26-8 of the Seuritisation Act^itself provides that notwithstanding anything contained^{in any} other law for the time being^{in force from the date of} commencement of the^{provisions of this Chapter, no} secured creditor shall be^{entitled to exercisethe right of} enforcement of the securities^{under Chapter III unless the} security interest created^{in its favourby the borrower,has} been registered with^{the Central Registry.It is submitted} that the respondent bank^{and its erring officers are} seeking to^{proceed againstthe propertiesin question,} violaUng the legitimate^{rights of the applicant underthe} Securiuzation Act^{without even complying with the} provisions of the SARFAESI Act in^{illegal manner which} cannot be and should^{not be allowed. It is submittedthat} the impugned notices^{issuedby the respondentbank} under Section 13(2) &^{13(4) of the Securitization Act are} wholly arbitrary, illegal and^{unconstitutionalas the} respondent bank has^{no right to take the possession of} the properties as^well as^{respondentbank has not right to} put the properties in^question for^{auction.It is submitted} that the action taken^{under Section 13(4) of the} SARFAESI Act is contrary^{to the factual matrix and any} tenable reasoning. It^{is submitted that the actiontaken} under Section¹³⁽⁴⁾ of^{the SARFAESI Act is not tenablein} law as well as facts of the^{presentcase and thus deserve} to be set aside and the^{impugned action has been taken} against the^principles of^{natural justice, fair play and} equity. It is submitted that,no^{notice under Rule 8(1) of}

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the Security Interest (Enforcement) Rules, 2002, has not been complied with by the respondent no.1 and as such all subsequent measures which have been iniUated by the respondent No.1 are contrary to law. It is submitted that the measures initiated by the respondent no.1 by publishing the symbolic^possession notice dated 18.10.2023 and 08.12.2023 are contrary to^Rule 8(2) of the Security Interest^{(Enforcement)Rules.} It^{is submitted} that the amount claimed is highly exaggerated^and inflated and without any basis or^{justification.} It^is submitted that the condition^{precedentto the issuanceof} the notice under Section 13 of^{the SARFAESIAct is the} ascertainment of the exact'debt'^{in accordancewith law,} which has not been satisfied. It^{is submittedthat there is} no^provision and /or sanction^{to executean unascertained} and ambiguous debt,^which is^{precisely what the} respondent no.l is attempting^{to do and therefore, the} action is bad in law.^{This issue has been clearlydealt with} in the^judgment of the^{Hon'ble HighCourt of Madrasin} Signal Apparels Vs.^{CanaraBank bearing Writ Petitions} No.5313/2010 and 5314/2010. It^{is submittedthat the} rate of interest allegedly charged^{and claimed by the} respondent no.1 is vague and^{illegaland respondent no.1} has charged interest at exorbitant^{rate which was not as} stipulated. The respondent is^{admittedly charging} compound interest and also^{penal interest which is barred} under law. It is submitted^{that the impugned action is} contrary to the law laid down^{by the Hon'ble Supreme} Couft of India in the matter^{of Mardia ChemicalsLtd' Vs'} Union of India. It is submitted^{that the noUceissued} under Section 13(2) of the SARFAESI^{Act fails to comply} with the mandatory conditions in failing^{to give the date} of defaulL if any, committed by the^{applicantand as to on} what date the first defaglt^{yvas committedby the} (\

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applicant company, therefore the impugned action is bad in law. It is submitted that the nonmentioning all relevant requisite details of the notice containing adequate and complete details, which is mandatory under Section 13(2) read with Section 13(3) of SARFAESI Act, 2002 renders the notice ineffective and therefore, any action taken in furtherance of the^{same is} also illegal and bad in law. It is submitted that the respondents cannot resort to measures/action^under Section 13(4) of the SARFAESI Act^2002,more pafticularly, at the Ume of issuance of notice under Section 13(2) of the SecuritisaUon^{Act 2002, the account} of the^petitioners was not^NPA. It^{is submitted that the} measures iniUated by the respondent^{no.l underSection} 13 (4) of the Securitisation Act are^{contrary to law and} the demand which is being^{raised by the respondent bank} is not legally outstanding and^{enforceable demandin the} eyes of law. It is submitted that^{the measuresinitiatedby} the respondent no.1 against the^{propeftiesof the} applicant is totally contrary to^{law for the specific reason} that in the month of July,^{2012,the respondent no.1 had} called upon the respondent^no.3 to^{reduceits limit from} Rs.68 Crores to Rs.48 Crores, upon^{whichone of the} properties standing in the name of the applicant^{had been} proposed to be released as one of the collateral^security i.e. the property bearing No.C-157,^{DefenceColony, New} Delhi, and the respondent No.3 was^{required to reduce} the exposure facility of Rs.20^Crores after^{sellingthe said} property. Upon the said consent the applicant^was required to mortgage the subject^matter of^three properties in the present SA as an interim collateral security uptil the Ume the hcilities^{from Rs.68 Crores are} reduced to Rs.48 Crores and Rs.20 Crores are^deposited by the sale^proceeds of the^property. It^{is submittedthat}

SA no.437 of2023

vide sanction letter dated 24.06.20t3, the respondent no.3 had reduaed the tacility to Rs.48 crores and thereafter the applicant had been vigorously following upon with the respondent bank to release the tifle documents of three properties which are subject matter in the present SA and as such there is no enforceable security interest which was created by the applicant in favour of the respondent bank and, therefore, the measures initiated/adopted by the respondent bank are thus liable to be set aside/ stayed. It is submitted that the measures iniUated by the respondent no.1 are totally contrary to law for the specific reason that the account was not NPA on the date which had been claimed by the respondent bank^pursuant to the demand notice issued under Section 13 (2) of the Securitisation Act dated 26.05.2022, for the specific reason that the borrower i.e. the respondent no.3 had duly operated the account, served the interest up till 30.09.2019 and thereafter^on 7.t0.2019, the CIRP was aftracted against the respondent no.3 and there was no^{justification/} reason for the respondent No.l to classiff the account as NPA. It is submitted that even today the account of the respondent no.3 is being operated by the resolution^professional appointed by the Hon'ble NCLI Chandigarh who^is operating the account and all the non fund base facilities are being allowed to be operated and as such the account does not fall within the ambit of NPA and as such the provisions of Section 13 of the Securitisation Act does not get attracted and, therefore, the measures initiated by the respondent No.l under Section 13 (4) of the Securitisation Act are wholly illegal, contrary to law and are liable to be set aside/^quashed. Accordingly, it is prayed that allow the present application, restrain the respondent no.1, restraining the respondent no.l, their g^''

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authorized employees, agents, seryants, attorneys from obtaining the possession, selling or disposing of the properties mentioned in the notices under Section 13(2) ofthe SARFAESI Act, 2002 as has been threatened by the authorized ofFicer of the bank, quash the setting aside the measures of the respondents under Section 13(4) of the Securitization Act of properties in questions, grant decree/order of declaration, declaring the aforesaid impugned measures as illegal, incompetent, void under the provisions of the Securitization Act, declare and hold that the said^properties in^question cannot be sold under the^provisions of SARFEASI M., 2002,^quash the setting aside the alleged measures of the respondent bank under Section 13(4) by which the^possession has been obtained and set aside the notice of demand issued under Section 13(2) of the Securitization Act. The Ld. Counsel for the applicant has relied upon the^{judgements Badri Nath Vs.} Govt. of Tamil Nadu, AIR 2000, SC 3243, Kanika Swami Vs. State of UP- MANU|UP|2703|20L7, Swastic Agencies and Anr. Vs. State Bank of India WP(C) no.7361 of^2008, N.D.Mercantitle Ltd. Vs. UCO Bank^passed by Hontle Calcutta High Court, PNB Vs. Mithilanchal Industries h/t.Ltd. and Ors. C|LPNL59|2020, Misons Leathers Ltd. Vs. Canara Bank passed by Honble Madras High Court in WP no. 85L712006, Jalgaon Janta Sahakari Bank Ltd. Vs. Joint Commissioner of Sales Tax WP No. 2935/2018 passed by Hontle Mumbai High Court and Authorised Officer Indian Overseas Bank and Anrs. Vs. Ashok Saw Mills SLP(C) No. 27399 of 2008.

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The respondent has filed reply to the SA. The respondent vehemently denied the allegations of the applicant and submitted that the applicants approached the respondent no. 1 for availing credit facilities and lastly vide sanction letter dated 16,04.2019 availed the credit O"

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SA no.437 of2023 15 facilities i.€., CC (Hypothecation & BD) of Rs.30 crores, Term Loan/Corporate Loan of Rs.7 crores, and bank Guarantee of Rs.60 crores and signed^and accepted the terms of the sanction letter dated 16.04.2019. It is submifted that applicants^equitably mortgaged the^properties with the^{respondent no. 1 and} created security interest for the credit^{facilities availed by} the respondent no. 3 along with other^{securitie,i.e. (a)} all^part and^parcel of^{House No. 530, measuring 300 sq'} meters situated at Sector 8,^{Panchkulaas per Conveyance} Deed Wasika No.2041 dated^{18.02.1996in the name of} Roshan Lal Mittal,^(b) all^{part and parcel of HouseNo.} 601, measuring 805^{sq. meter situated at Sector6,} Panchkula as^per sale deed^{Wasika No.256dated} 27.04.20M standingⁱⁿ the^{name of Sh. Roshan Lal & Sh'} Lakshmi Chand,^(c) all^{part and parcel of reidentialHIG} Flat No.1464, Ground^{Floor, measurtng t47.28 sq. yards} situated at Sector 43-8,^{Chandigarhstanding in the name} of Sh. JaUnder^{Mittal as per Conveyance deed dated5470} dated 14.03.2004^(d) all^{part and parcel of Commercial} Building, Unit no.34, on^{Ground Floor bearingMCD} No.6/51, Block III, Known^{as Tribhuvan Complex,} comprised in Khasra^{no.L723117051263min,} t724117071262 min and 264^{min, situated at Ishwar} Nagar, Village Bahapur,^{Tenth Milestone,Mathura Road,} New Delhi, total area 882.205^{sq. ft (81.96 sq. meters) as} per sale deed no.674 dated 18.01.2010ⁱⁿ the^{name of} Neelam Mittal, (e) all^part and^{parcel of commercial} building, Unit no. 35, on Ground^{Floor bearing MCD} No.6/51, Block III, Known as^{Tribhuvan Complex,} comprised in Khasra No.L723117051263^min, t724117071262 min and 2@^{min, situated at Ishwar} Nagar, Village Bahapur, Tenth^{Milestone,Mathura Road,} New Delhi, total area 882.205^{sq. ft (81.96 sq. meters) as}

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SA no.437 of2023

per sale deed no. 675 dated 18.01.2010 in the name of Neelam Mittal and (f) all^part and^parcel of commercial building, Unit No.36, on Ground Floor bearing MCD No. 6/51, Block III, Known as Tribhuvan Complex, comprised in Khasra No. L7231L7051263^min, L724117071262 min and 264 min, situated at^Ishwar Nagar, Village Bahapur, Tenth^{Milestone,Mathura Road,} New Delhi, total area 882.205 sq. ft^(81.96 sq.^{meters) as} per sale deed no.676 dated 18.01.2010 in the name of Neelam Mittal. It is submitted that applicant^{no. 1 duly} availed the aforesaid credit facility^{grantedto him by the} respondent bank. However, the applicant^remained irregular in conduct of the aforesaid^{Creditfacility and} neglected to maintain the financial^{discipline.Thus, the} respondent bank was left^{with no other option but to} declare the account as^NPA on^{28.t2.20t9 in terms of RBI} guidelines. It is submitted that the respondent^{bank vide} their several communications^{called upon applicant no.l} to regularize the accounb and^{maintain ib financial} discipline, but the applicant^{no.1 failed to do so.} Thereafter, the accounts of the applicant^{no. 1 were} migrated to the respondent no. 1^{bank's Stressed Assets} Management Branch, SCO 99-t07,^Sector9-C, Chandigarh-16009^(UT) as a^paft of^{respondent bank's} policy for stressed assets accounts and to^initiate appropriate resolution & recovery^{strategies. Thus, the} accounts of the applicant no.^{1 C.ompany are now being} maintained at the Stressed Assets^{ManagementBranch,} Chandigarh with due information to the^applicants. Accordingly, the respondent bank's Stressed^Assets Management Branch is maintaining/^monitoring /conuolling^{the accounts of the applicants,in which the} debts claimed by the respondent bank against^the applicants are outstanding for the time the^{accounts were}

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SAno.437 of2023

classified as NPA on 28.12.20t9 in accordance with the RBI guidelines with due information to the applicants. It is submitted that the respondent bank^vide their several letters called upon the applicant no.1^to regularize the accounts and maintain its^financial diripline, but the applicant no.1 failed to^{liquidate the} outstanding amount. It is submitted^{that the respondent} bank has filed an OA no.133/2021 before^{the Hon'ble} DRT-II, Chandigarh for an amount of^{Rs.35,03,0L,487.99} as on 04.01.2021 against the applicants'^{It is submitted} that the respondent bank^{issueda demand notice dated} 26.05.2022 under Section^{13(2) of the Securitisation Act,} 2OO2 to the applicants for an^{amount of} Rs.35,98,49,496.L4 as on 28.12'2019^{along with future} cost, interest and other^{expenses. It is submittedthat the} demand notice^was duly^{served uponthe applicants. It is} submitted that the applicants^{submitted their objections} dated 22.07.2022 to the^{demandnotice dated} 26.05.2022, which was replied^{by the respondent bank} vide its letter dated t6.08.2022^{under Section 13(3A) of} the SecuriUsation Act,^{wherebythe respondentbank has} rejected the objections^{raised by the applicants.It is} submitted that respondent^{bank took symbolic possession} on 18.10.2023 and^{published the same in two newspapers} in terms of Rule 8 of the^{SecurityInterest (Enforcement)} Rules, 2002 on 18.10.2023^{in respect of the properties (a)} all part and^parcel of^{HouseNo, 630, measuring 300 sq.} meters situated at Sector 8,^{Panchkula(b) all part and} parcel of House No. 601, measuring 805 sq.^meter situated at Sector 6, Panchkula^(c) all^{part and parcel of} residential HIG Flat No.1464, Ground^{Floor, measuring} L47.28 sq.^yards situated at Sector^{43-B,Chandigarh.It} is submitted that respondent no. 1 took^symbolic possession of the properties on 08.12.2023 in terms of

SAno.437 of2023

;

Rule I of the Security Interest (Enforcement) Rules, 2002, i.e. all part and parcel of Commercial Building, Unit no.34, 35 and 36 on Ground Floor bearing MCD No.6/51, Block III, Known as Tribhuvan Complex, comprised in Khasra no.L723lL7O5l263 min, t7241L7071262 min and 264 min, situated at Ishwar Nagar, Village Bahapur, Tenth Milestone, Mathura Road, New Delhi, total area 882.205 sq. ft.^(81.96 sq.^meters) as^per sale deed dated 18.01.2010 in the^name of^Neelam Mittal. It is submitted that respondent no. 1 issued^a notice dated 07.L2.2023 under Rule 8(6) of the^Security Interest (Enforcement) Rules, 2002 for sale of^two properties situated at Panchkula & Chandigarh. It is submitted that the respondent^{no. 1 duly publishedthe} sale notice in two newspapers in terms of^{Rule 9 of the} Security Interest^{(Enforcement) Rules, 2002. Itis} submitted that the sale of the^{propertiesbearing (a) all} part and parcel of Residential HIG Flat No.1464, Ground Floor, measuring L47.28 sq.^{yards situated at Sector 43-8,} Chandigarh and (b) att^part and^parcel of^{House No.630,} measuring 300 sq. meters situated at^{Sector B, Panchkula} are slated for e-auction on 17.01.2024. It^{is submitted} that respondent no. t has initiated^{Securitisation} proceedings and issued notice under Section 13(2) of the Securitisation Act, 2002 to the borrower &^{guarantorsfor} an amount of Rs.35,98,49,496.L4^{as on 28.12.2019 along} with future cost, interest, and other expenses. It^is submitted that the SA applicants^{are jointly and severally} liable for the dues of the respondent no.¹ and^{has not} paid a single penny since the issuance of the demand notice dated 26.05.2022 issued by the^{respondentno. 1} under Section 13(2) of the Securitisation^{Act, 2002'} Therefore, the^present SA is liable to be dismissed^with heavy costs. It is submi$ed that the SA applicant^has

-t).

SA no.437 of2023

neither denied the availing of the credit facilities nor denied the execution of the loan and security documents in hvour of the respondent bank and creation of equitable mortgage of the properties in question for the credit facilities availed by it. It is submitted that the accounts of the applicant no. 1 were classified as NPA on 28.t2.20L9 in terms of the Master Circular^prudential norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances issued by the RBI from Ume to Ume. It is submitted that the account of the applicant no. 1 was in default and the borrower failed to maintain the drawing power and or interest applied on monthly basis in the loan account not serviced as per the sanction letter. It is submitted that the account has been irregular and consequenfly the bank has classified the account as NPA on 28.12.2019 and initiated Securitisation proceedings by issuing a demand notice dated 26.05.2022 to the applicants under Section 13 (2) of the Securitisation Ad, 2002.It is submitted that in terms of clause 2.1.2 (ii) read with Clause 2.2 of the RBI Guidelines i.e. Master Circular prudential norms on Income Recognition, Asset Classification and provisioning pertaining to Advances, as the installment of Corporate Loan amounting to Rs.10 crores remain unpaid for more than 90 days. Therefore, in terms of the guidelines issued by RBI from time to time, the bank was left with no other option but to declare'the account as NpA on 2g.12.2019. It is further submitted that as per para 4.2.7 of the RBI guidelines the accounb of borrower are declared as NpA borrower-wise and not facility-wise. Therefore, if an account of the borrower is declared as NpA then other accounts of the same borrower are simuttaneously declared as NPA. It is submitted that the corporate loan of Rs.10.00 crore was sanctioned to the respondent no. 3

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SAno.437 of2023

vide sanction letter dated 08.03.2017' It^{is submifted} that the repayment of corporate^{loan in 20 equal} quafterly installments of Rs. 50 Lakhs beginning^June 20L7. lt is submitted that the installment^{of September} 2019 of Rs.50 Lacs to be^paid by 30.09.2019^{has not} been^paid till 28.12.2019. As^per the^{guidelines issued by} the RBI from time-to-time accounts^{are classified as NPA} borrower wise and not account^{wise. Therefore,if one of} the accounts is classified as NPA then all^{the accountsof} the borrower become NPA. It is submitted^{that the} Hon'ble Supreme Couft in the matter of^Standard Chartered Bank Vs Nobel Kumar⁽²⁰¹³⁾ 9^{SCC 620 and} Hindon Forge Private Limited and another^{vs. State} of^UP, (2019) 2 SCC 198 has held that once the statutory^period prescribed under Section 13(2) comes to an end or when the bank has decided and rejected the objections, if any, preferred by the debtor which ever be later, it is open to the secured creditor to take^possession of the^secured assets complying with the^provisions made in^Rule 8. It^is further submitted that neither Section 13(4) nor Rule 8 of the SARFAESI Act, 2002 contemplates or envisages^prior notice being given apprising the debtors of the^proposed date of taking of^possession. It is submitted that on expiry of 60 days from the date of the notice under Section 13(2) and once the objections, if any,^preferred under sub-section 13 (3A) have been rejected the statute in unambiguous terms empowers the secured creditor to take possession. In the present case the applicants have not filed any objections/ representation to the notice issued under Section 13(2) by the bank within the stipulated time of 60 days. It is submitted that the taking of possession is governed by the^provisions made in Rule 8 of the 2002 Rules. Rule 8(1)^prescribes that the authorised officer shall take^po_ssession by delivery of a <J.

SAno.437 of2023

possession notice prepared in accordance with the format^prescribed in Appendix IV. The^possession notice^prescribed in Appendix IV carries the^recital of^the fact that despite the expiry of 60 days of the^{notice under} Section 13(2), the borrower has failed to^{repay the} amount. It also records the consequential^{fact of the} authorised officer having taken^possession of the^secured assets in exercise of^powers conferred under^Section 13(4). On a conjoint reading of Section¹³ and^Rule 8,^it is therefore, manifest and abundantly clear that^{no notice} is envisaged in law to intervene the Section 13(2)^Notice and the^possession notice issued under^Rule 8(1).^{This is} evident from a^plain construct of the^scheme of the²⁰⁰² Act when it empowers the creditor to enforce a^measure specified in sub-section (4) upon a failure of the borrower to discharge the liability. The borrower/^guarantor/ mortgagor, it becomes relevant to note, is already^made aware by the stah.rte of the measures which are^likely to be enforced in case he fails to discharge the^liability within 60 days of the notice under Section 13(2) or where the objections, if any,^preferred against that notice come to be rejected and a decision thereon communicated to him. It is submitted that the legal^position as envisaged under the Securitisation Ac..,2002 and Rules framed there under that is evident from the construction of Rule 8 as expounded by the Supreme Court in Noble Kumar, the provisions of that Rule itself embody the procedure to be followed by a secured creditor seeking to take^possession without the interuention of the Court. It is therefore evident that a^possession notice effected in accordance with the provisions of Rules 8(1) and (2) is sufficient evidence in itself of^possession having been taken by the creditor. The act of taking over^possession in terms of the statutory^provisions made in the 2Q02 Act and the 2002 9J.

SAno.437 of2023

Rules is complete the moment the^possession notice is delivered and^published in accordance therewith. It is, therefore, clear that no obligation, statutory or otherwise, stands^placed upon the creditor to apprise the borrower of its intent to take^possession. It is submitted that the Section 13 of the Securitisation Act, 2002 and Rule 8 of the Security Interest (Enforcement) Rules, 2002 would reveal that there is no scope for introducing the concept of a notice evidencing an intent of taking possession or apprising the borrower of the proposed date of taking over of^possession. It is submitted that Security Interest has been created by the SA applicants in favour of the respondent no. 1 bank in terms of Section 2 (zf) of the Securitisation Act, 2002. It is submifted that respondent'no.1 has taken^possession on 18.10.2023, whereas the present SA has been filed on 19.12.2023 and as such the^present SA is liable to be dismissed on this ground alone. It is submitted that the accounts were classified as NPA by the respondent no. 1 as the borrower/respondent no. 3 and applicants failed to service interest in the accounts. It is further submitted that the installments of term loan were not^paid as^per schedule. Therefore, the respondent no. 1 was left with no other option but to classiff the account as NPA on 28.12.2019 in terms of the RBI^guidelines issued from time to time. It is further submitted that the accounts are classified as borrower wise and not account wise. It is further submitted that as per Section 13(3A) the reasons so communicated or the likely action of the secured creditor at the stage of communication of reasons shall not confer any right upon the borrower to^prefer an application to the Debts Recovery Tribunal under Section 17 or the Court of District Judge under Section 17A. Therefore, rejection of the representation of the objections by the

SAno.437 of2023

respondent no. 1 bank does not give any Gluse of action in favour of the applicants for filing the^present SA. It is submitted that^present SA is filed barred by limitation as the present SA has been filed on 18.10.2023, which is beyond the stipulated time under Section 17 of the Securitisation Act, 2002. It is submitted that respondent no. t has duly published the^possession notice in the mewspapers in compliance with the^provisions of Rule 8 of the Security Interest (Enforcement) Rules, 2002. It is submitted that the interest was charged in terms of the loan and security documents executed by the applicants and respondent no. 3 in favour of the respondent. It is submitted that classification of account as NPA is an internal aspect of the management of the accounts governed by the guidelines issued by RBI from time to time. Moreover, no proceedings initiated against the corporate debtor/ respondent no. 3 under the Securitisation Act and Rules framed there under. It^is submitted that no demand notice has been raised against the corporate debtor. It is submitted that respondent no. 1 is enforcing the security interest created by the^personal guarantors, who are jointly and severally liable for the dues of the respondent no. 1 bank. It is submitted that the Hon'ble Supreme Couft in the matter of SBI Vs Ramakishnan & Another (2018) 17 SCC 394 has held that there is no bar in proceeding against the^personal guarantors pending CIRP proceedings against the corporate debtor. Accordingly, it has been prayed that the present SA may be rejected.

¶89

Both parties have filed their respective evidence. Both^parties have filed their written arguments.

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SAno.437 of2023

Heard the Ld. Counsel of both the^parties and also^perused the record and the written arguments filed by both the^pafties.

¶94

The main contention of the Ld. counsel of the applicant is that the account of the borrower has been wrongly classified as NPA. It is submitted that there was sufficient balance in the CC account of the borrower and therefore, the account cannot be declared as NPA. It is submitted that the borrower has also taken a corporate term loan of Rs.10 Crores which was to be^paid in 20 equal,^quarterly installments of Rs.50 Lacs each beginning June,2017. It is submitted that the installment of the corporate loan account was to be debited from the CC account and therefore, the respondent bank was at liberty to debit the installment of the corporate loan account from the CC account and the account of the corporate term loan cannot be declared as NPA. Therefore, the entire action taken by the bank is against the RBI guidelines and therefore, the declaration of the account is totally illegal. On the other hand the Ld. counsel for the respondent bank has submifted that vide sanction letter dated 08.03.2017 a corporate loan of Rs.10 crores was sanctioned to the borrower. The corporate loan was supposed to be paid in 20 quafterly installments of Rs.50 lacs each starting from June,2O17. It is submitted that the applicant has failed to pay the installments of September,l9 to be paid by 30.09.2019 and therefore, the account of the applicant was declared as NPA as per guidelines of the RBI as the account remain unpaid. It is submitted that as per RBI guidelines the accounts are classified as NPA borrower wise and not account wise and therefore, all accounts of the borrower become NPA. It is further submitted that no standing instructions for paying

SAno.437 of2023

the installment from the cash credit account was given and therefore, the respondent bank has no authority to debit the account of the borrower to^pay the quafterly installment of the corporate term loan and therefore, the respondent bank could not deduct the installment from the CC limit. It is submifted that the applicant has failed to^prove that there was any standing instructions regarding the debit of the^quafterly installments of the corporate term loan from the CC account and therefore, the contention of the applicant is totally against the fact and therefore, the declaration of the account was rightly classified as NPA. In this regard I have considered the rival contentions of both the^parties and also^perused the record. It is an admitted fact that the respondent bank was pleased to sanction the cash credit limit of Rs.30 Croreq corporate term loan of Rs.10 Crores and Bank Guarantee of Rs.60 Crores on 08.03.2017. As per statement of account and as^per written arguments filed by both the parties it is clear that the cash credit limit was within sanction limit and there was no overdue in the cash credit limit. The main contenUon of the Ld. counsel of the respondent bank is that the quarterly installment of Rs.50 Lacs was not paid against the term loan and therefore, the account became NPA and the account is to be declared NPA borrower wise and not account wise and therefore, all the accounts of the borrower were declared as NPA. Therefore, this Tribunal has to see whether the corporate term loan account of the borrower has become NPA as claimed by the respondent bank or it was regular as per claim by the SA applicant. In this regard I have perused the statement of account of the corporate term loan account. From the perusal of the statement of account it is clear that the installment of the corporate term loan account was d--

¶99

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SAno.437 of2023

¶101

debited from the cash credit account of the borrower. Both the^parties have made references of the credit amount that has been credited in the corporate loan account through cash credit account. I have^perused these contentions. From^perusal of the written arguments and the statement of account, it is clear that as per written arguments contained in^para no.9 of the respondent ban( the corporate loan account was credited from the cash credit account on 10.07.2017, t0.L0.20L7, 30.01.2018, 31.03.2018, t3.07.20t8, 28.t1.20L8, 31.12.2018, 06.05.2019, 29.08.2019 and 30.08.2019. As per written arguments of the respondent bank, the installment of September, 2019 of Rs.50 Lacs to be^paid on 30.09.2019 has not been^paid till 18.12.2019 and as per guidelines of the RBI the account was classified as NPA. In the para no.10 of the written arguments filed by the respondent bank, it has been mentioned that no sbnding instruction for paying the installment from ash crdt amunt of the respondent no.3. It is submittd that the counsel for the applicant farfd to show that there is any standing instructbn or chques issued for transferring funds from CC account to the term loan account It is pertinent to point out that respondent no.I rs under a funking busines and not for running the company of the rupondent no.3. It is submittd that the respondent no.3 i&lf transferrd ib fund from its CC account to the term loan acount as per auailability of the funds and as per ib commercial wiilom without any interuention of the respondent no.l bank A bare peruat of the statement of term lan account would reveal that transfer from CC account to term loan account was made on different dates with different amounE which clearly indicat* that there was no sbnding instructions or PDG as claimd by the counrel of the 5A applicant Therefore, the contention

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SAno.437 of2023

of the respondent bank is that there was no standing instructions on behalf of the borrower to debit the installment of the corporate term loan from the CC account. It is further submitted that the no^post dated cheques were issued by the borrower to the bank with regard to the payment of the installments. On the other hand the Ld. counsel of the applicant has submitted that there was standing instructions regarding the debit of the installments of the corporate loan account from the CC account. In the present case the applicant is the guarantor of the loan and is not the borrower of the loan, therefore, the applicant has no occasion to have an evidence that there was any standing instructions regarding the debit of the installment from the CC account. From the statement of account filed by both the parties it is clear that in the statement of account it has been mentioned that the amount has been transferred from the CC account. It is claimed by the respondent bank that there were no post dated cheques issued by the borrower. Therefore, it was the duty of the respondent bank to show the negoUable instrument on the basis of which the amount of the installment was transferred from CC account to the corporate term account. The amount can be transferred from one loan account to another loan account only through a negotiable instrument or by standing instructions. As per the own admission of the respondent no.1 in the para no.10 of the written arguments that there were no PDCs that means there were no post dated cheques on the basis of which the gmount from the CC loan account was transferred to the corporate term loan account. It is also claimed that there was no standing instructions or cheques issued for transferring the fund from CC account to the term loan account. Therefore, the respondent bank has to explain

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SAno.437 of2023

on basis of which negotiable instrument the amount from CC limit to corporate term loan account has been affected by the respondent bank. As stated above, the amount from one loan account can be transferred from one loan account to other loan account only through any negotiable instrument. If there was no standing instruction and no cheque, then it is the duty of the respondent bank to show the instrument on the basis of which the amount from the CC loan account was transferred to the corporate term loan account on the dates mentioned in the para no.9 of the written arguments. If there was no negoUable instrument issued by the borrower to transfer the amount from CC loan account to the corporate term loan account, the only presumpticn that can be drawn that there was a standing instruction regarding the transfer of the amount from CC loan account to the corporate term loan account. There is no claim of the respondent bank that the respondent bank has transferred the amount mentioned in para no.9 of the table on the oral instructions of the borrower. Even if there was any oral instructions, the bank cannot transfer any amount on oral instructions. Therefore, the claim of the respondent bank does not appear to be sound that there was no outstanding amount as the respondent bank has failed to prove, if there was no standing instructions then how the amount was transferred from the CC account to the corporate term loan account. Merely because the amount was transferred on different date and different amounts were transferred, it cannot be presumed that there was no standing instruction. If there was no standing instruction, it was the duty of the respondent bank to satisff the Tribunal as the amount which has been credited to the corporate term loan account from the CC account has been credited

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SAno.437 of2023

on basis of which negotiable instrument and the respondent bank has failed to^prove so and therefore, the contention of the applicant is liable to be accepted.

¶114

Even if it is admitted that the borrower has failed to make the^payment of Rs.50 Lacs due in the September, 2019, the question is whether the account can be classified as NPA on 28.12.2019. The respondent bank in the para no.9 of the written submission has admitted that the installment of Rs.50 Lacs was made on 29.08.2019 which has been mentioned at serial no.(i) and it is also menUoned that an amount of Rs.42,73,551.00 was made on 30.08.2019 which was due for June,19. Therefore, it is clear that all the installment up to June,19 has been duly paid by the borrower. In the written arguments at page no.3 in para no.1 it has been mentioned by the Ld. counsel for the respondent bank that the installment of Septembr,l9 of Rs.50 Lacs to be^paid by 30.09.2019 has not been^paid till 28.L2.20t9 and therefore, the account has been declared as NPA. As^per guidelines issued by the RBI, if the account remains unpaid for more than 90 days, the account may be declared as NPA. From^perusal of the written arguments it is clear that as per his own statement of the respondent the installment was to be paid by 30.09.2019 and therefore, if the borrower has failed to pay the amount, the account can be declared NPA after expiry of 90 days from 30.09.2019. From perusal of the sanction letter it is clear that quarterly installment was directed to be paid in the quarter. No date for^payment of the installment has been mentioned in the sanction letter, therefore, as per sanction letter also the borrower can pay the installment of September,20l9 till 30.09.2019. Therefore, the over due date will be after 30.09.2019. Now the^question is-whether the account has

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SA no. 437 of2023

been declared NPA after expiry of 90 days commencing from 30.09.2019 which was the last date due for the^payment of the installment of the corporate term loan. Now we have to calculate the 90 days. (a) The last date of due installment - 30.09.2019 (b) Default :

¶119

01.10.2019 to 31.10.2019 - 31 days 01.11.2019 to 30.11.2019 - 30 days 01.12.2019 to 27.t2.20L9 - 27 days Total - 88 days

¶120

Therefore, it is clear that even the Tribunal presumed that the borrower hiled to pay the installment the account has been declared NPA on the 89s day i.e. 28.12.20L9. The account has been declared NPA on 28.L2.20L9, therefore, that date cannot be counted in the period of 90 days because on that date the account has already been declared NPA and as per guidelines the account can be declared after default of 90 days that means that on the 91s day. Only on 91s day the 90 days will be completed for default. Therefore, the account cannot be declared NPA on 906 day but after completion of 90 days on 91* day. Similarly, the applicant was entitled to^pay the installment upto 30.09.2019, therefore, the date of 30.09.2019 cannot be counted in the default as the default date shall initiate from 01.10.2019 and on the 30.09.2019 the default cannot be presumed. Therefore, it is clear that NPA has been declared only on default of 88 days and not on completion of 90 days as per RBI guidelines. Therefore, the declaration of the account as NPA is against the guidelines issued by the RBI and therefore, the action taken by the respondent bank is against the RBI guidelines. If the declaraUon of the account as NPA is against_the RBI guidelinet all

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SAno.437 of2023

subsequent actions deemed to be invalid and the respondent bank cannot be permitted to^proceed on the wrong declaration of the account and therefore, the action taken by the respondent bank shall be deemed to be against the^provisions of the SARFAESI Act and liable to be set aside.

¶125

The next contention of the Ld. counsel for the applicant is that 14 UC^policies have been under charge of the bank and that has to be credited into the ac@unt of the applicant but the same has not been credited into the account of the applicant and therefore, the notice under Section 13(2) of the SARFAESI Act is invalid. On the other hand the Ld. counsel for respondent has submifted that the LIC policies have been credited in the account for arriving at total dues for issuance of notice under Section 13(2) of the SARFAESI Act after classiffing the account as NPA on 28.12.2019. The Ld. cpunsel for the respondent bank has given the table on which date the LIC^policies has been matured. At page no.6 of the wriften arguments, the Ld. counsel for the respondent bank has specified that the SBI policies have been matured on 25.03.202L and a total amount of Rs.23,4L,967.64 has been credited in the account of the borrower. In the table it is also mentioned that out of 5 LIC policies, 2 policies has been matured on 26.09.2023 and 3^policies has been matured on 08.02.2024 and 2 SBI policies has been matured on 20.09.2022 and 27.t2.2024 respectively and a total amount of Rs.1,10,10,056.08 has been credited. It is submitted by the Ld. counsel for the respondent that these policies has been matured after declaration of the account as NPA, therefore, the same could not be adjusted before declaration ofthe account as NPA. From perusal of the record it is clear that the

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SAno.437 of2023

declaration of the account as NPA has been declared invalid as mentioned above and the respondent bank in the notice issued under Section 13(2) of the SARFAESI Act has not mentioned the fact of the maturity of the four SBI^policies that has been matured before issuance of the notice under Section 13(2) of the SARFAESI Act. From perusal of the demand notice issued under Section f 3(2) of the SARFAESI Act it is clear that the respondent bank has mentioned the policies which has already been matured on 25.03.2021 and therefore, the respondent bank has failed to take into account the credit of the amount that has been received by the respondent bank on the maturity of the four SBI life^policies. In the written submission it has been mentioned that the four SBI life policies have been matured on 25.03.202L and an amount of Rs.23,41,967.U has been received by the respondent bank. When the amount of Rs.23,41,967.ffi has already been received on 25.03.2021, why the due credit has not been given to such amount in the demand notice issued on 26.05.2022 mentioning that these policies are security agreement when the same has already been^paid to the respondent bank. Therefore, it is clear that the respondent bank has wrongly mentioned the security of four SBI life policies which has already been matured on 25.03.2021 in the demand notice dated 26.05.2022. The due credit of the mentioned amount has also not been shown in the demand noUce and a wrong amount of due amount has been mentioned in the demand notice and thereforg there is clear violation of the Section 13(2) of the SARFAESI Act.

¶130

The next contention of the Ld. counsel for applicant is that in the demand notice there is no bifurcation of the amount due and therefore, there is non compliance of

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SA no.437 of2023

Section 13(3) of the SARFAESI Act and the mandate given by the Hontle Gujrat High Court in PNB Vs. Mithlanchal Industries Ltd. & Ors. The Ld. counsel for the respondent bank has not responded to this argument in the written arguments while in the oral arguments he has submitted that due bifurcation of the amount due has been given in the demand notice issued under Section 13(2) of the SARFAESI Act. In this regard I have^perused the demand notice issued by the respondent bank dated 26.05.2022. From^perusal of the demand notice it is clear that in the demand notice the account number and the outstanding amount has been shown. In the demand notice the principle amount due, the rate of interest, the amount of the interest, the rate of penal interest, the amount of the penal interest and other charges has not been mentioned, therefore, it is clear that only the total outstanding amount has been written in the demand notice and therefore, there is no bifurcation of the amount due has been given in the demand notice issued under Section 13(2) of the SARFAESI Act. Therefore, there is a clear violation of Section 13(3) of the SARFAESI Act which mandate the secured creditor to give the details of the amount due from the borrower. The Hontle Gujrat High Court in PNB Vs. Mithlanachal has categorically held in para no.43 that the secured creditor has to give the bifurcation of the amount due in the demand notice issued under Section 13(2) of the SARFAESI Act and if the same has not been done the entire SARFAESI action is liable to be set aside. Therefore, this Tribunal is of the view that there is violation of Section 13(3) and mandate given by the Honble Gujrat High Court, therefore, the action taken by the respondent bank is bad in law.

¶135

l-q)-,.

¶136

SA no.437 of2023 34

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The next contention of Ld. counsel of the applient is that there is wrong description of the property. It is submitted that in the demand notice issued under Section 13(2) of the SARFAESI Act the measurement of the^property has been mentioned as 350 sq.yds. whereas in the notice issued under Section 13(4) of the SARFAESI Act, the measurement of the same property has been mentioned as 300 sq.mtrs. It is submitted that 350 sq.yds. is not 300 sq.mtrs and 300 sq.mtrs. is equivalent to 359 sq.yds and 350 sq.yds is equal to 292.645 mtrs. and therefore, there is wrong description of the property in the demand notice and the possession notice. In this regard I have perused the demand notice dated 26.05.2022.In the demand notice the part-I mentions the hypothecation of movable property and pafticulars of immovable properties equitable mortgage and paper based securities assigned with the SBI bank. At serial number 3 the residential house no. 630, Sector-8, Panchkula, Haryana has been mentioned and total area has been given as 350 sq.yds. From perusal of the notice issued under Section 13(4) of the SARFAESI Act dated 18.10.2023 the description of the propefty has been mentioned as House no.630, Sector-8, Panchkula, Haryana and the total area has been mentioned as 300 sq.mtrs. Therefore, in the demand notice the area of the propefi has been mentioned entirely different which is mentioned in the possession notice. It is a fact that 300 sq.mtrs is not equivalent to 350 sq.yds. Therefore, the area of the subject^property has been given differently in the two notices. The Ld. counsel for the respondent bank has not given any response to these discrepancies. Thereforg it is clear that there is a discrepancy regarding the area of the one of the subject property in the demand notice and the

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possession notice and therefore, the action taken by the respondent bank is against the^provisions of the SARFAESI Act/ SARFAESI Rules.

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The next contention of the Ld. counsel of applicant is that the respondent bank can claim a penal interest @1olo^{whereas the respondentbank has charged rate of} interest @5olo as penal interest. In this regard I have perused the record. From perusal of the sanction letter it is clear that in case of default the respondent bank can claim a^penal charge @5olo^p.a. Therefore, the contention of the applicant has no force.

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There is also a dispute as to whether the account can be declared as NPA during the^pendency of the CIRP proceedings before the Ld. NCLT. It is an admitted fact that CIRP^proceedings have been initiated against the borrow and during the^pendency of CIRP^proceedings the account of the borrower has been declared as NPA. The Ld. counsel for the respondent bank has mentioned the judgement of the SBI Vs. Ram Krishnan and Ors. (2018) and submitted that there is no bar in^proceedings against the personal guarantor pending CIRP proceedings against the corporate debtor. In the present case the dispute is not that during pendency of the CIRP proceedings before the Ld. NCLT whether the proceedings under the SARFAESI Act can be initiated against the guarantor or not. The query of the Tribunal was whether during the pendency of the CIRP proceedings the account can be declared as NPA. The Ld. counsel for the respondent bank has mentioned the Section 14 of the IBC and submitted that legal^proceedings against the corporate debtor may be initiated and there is no bar regarding the classification of the account as NPA. In this ard I have perused the

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Section L4 of the IBC. This provision does not relate to the declaration of the aacount as NPA. This provision relates to the acts which the adjudicaUng authority shall by order declared moratorium for prohibiting to be done. Therefore, when the CIRP proceedings has already been initiated before the Ld. NCLT and the Ld. NCLT was assigned with the resolution of the company, the account of the borrower could only be declared as NPA after taking permission from the l-d. NCLT. Therefore, this Tribunal is of the view that during pendency of the CIRP proceedings the account of the borrower should not have been declared NPA before getting permission or at least information to the Ld. NCLT so that the appropriate action may be taken by the Ld. NCLT with regard to the resolution of the company.

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L4. On the basis of above discussion, the Tribunal is of the view that the declaration of the account as NPA has been made against the guidelines issued by the RBI before expiry of 90 dayq the amount received from the maturity of the SBI life policies has not been mentioned in the notice issued under Section 13(2) of the SARFAESI Act, there is violation of the mandate given in the Section 13(3) of the SARFAESI Act and the direction given by the Hontle Gujrat High Court in PNB Vs. Mithlanchal Industries, there is wrong description of the properties in the demand notice and the possession notice and there is also wrong declaration of the account as NPA during the pendency of the CIRP proceedings and therefore, the respondent bank has committed gross illegality by initiating the action against the applicant who is a guarantor and therefore, the SARFAESI action taken by the respondent bank is liable to be set aside.

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the SA

On the basis of above discussion,

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no.43712023 is liable to be allowed.

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ORDER