Disposed

V Jegan v. Tamilnad Mercantile Bank Limited

DRT25 Apr 2025SA/487/2024

Case brief

AI extract

What is this about?

The Tribunal considered a SARFAESI application challenging improper service and publication of sale notices. The auction failed due to lack of bidders. The Tribunal directed the bank to exclude unresolved sale notice expenses from the loan account.

What did the court decide?

The SARFAESI application is disposed of; the Defendant Bank is directed not to include expenditure incurred in issuing the Sale Notice dated 06.07.2024 in the Applicant's loan account.

V Jegan versus Tamilnad Mercantile Bank Limited — Banking and Recovery | DRT (2025)

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SA No.487/2024

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Fair Order

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IN THE DEBTS RECOVERY TRIBUNAL AT MADURAI

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DATED THIS 25^th DAY OF APRIL, 2025

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PRESENT: SEEMA SINHA

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[PR. DISTRICT & SESSIONS JUDGE - Retd] PRESIDING OFFICER

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SA No. 487/2024

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Mr. V. Jegan, S/o. Mr. C. Virumandi, No. 3/179A N No. 3/177, Palkalai Nagar, Nagamalai Pudur, Vadapalanchi Village, Madurai – 625 021. --- Applicant

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-Vs-

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The Authorized Officer, Tamilnad Mercantile Bank Limited, Nagamalai Pudukottai Branch, D. No. 5/161, Theni Main Road, Nagamalai Pudukottai, Madurai – 625 019. --- Defendant Bank

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Appearance of Advocates: Mr. S. Suresh ---- Counsel for the Applicant Mr. N. Dilip Kumar ---- Counsel for the Defendant Bank

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This SARFAESI Application was heard in the presence of Counsels for the Applicant and the Defendant Bank and fixed for passing final order before me and upon hearing the arguments of the Counsels and having stood over for consideration till this day, this Tribunal delivered the following:

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O R D E R

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1 . This Application has been filed u/s. 17(1) of the SARFAESI Act, 2002 by the Applicant praying that this Hon'ble Tribunal may be pleased to call for the records pertaining to the initiation of proceedings under the

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Page 1 of 11

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SA No.487/2024

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SARFAESI Act, 2002 ending up with the Sale Notice dated 06.07.2024 fixing the Auction Sale on 01.08.2024 including taking Physical Possession of the secured assets and pass further orders and to quash the entire proceedings taken under the SARFAESI Act by the Defendant.

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2 . The brief averments of the Application filed by the Applicant are as follows:-

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The Counsel for the Applicant submitted that the Applicant along with his mother have approached the Defendant Bank and obtained a Term Loan for a sum of Rs. 20.00 Lakhs on 14.12.2018 by executing necessary security documents in favour of the Defendant. The Applicant has deposited his title deeds and created equitable mortgage over the property. Initially, the Applicant was very prompt in repaying the Loan facility as per the Sanction Letter. However, due to the impact of COVID-19 Pandemic, the Applicant could not run his business and he was compelled to close his business. Hence, he could not repay some installments to the Defendant. But he never allowed his account to become NPA. But the Defendant Bank has declared the Applicant's account as NPA on 31.05.2021 without following the RBI norms and guidelines.

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It is further submitted that all of a sudden, the Defendant issued a Demand Notice dated 21.08.21, u/s.13(2) of the SARFAESI Act and also issued Possession Notice dated 25.11.21, u/s. 13(4) of SARFAESI Act to the Applicant and has taken Physical Possession of the secured assets on 18.07.24 through Advocate Commissioner appointed by the Ld. Chief Judicial Magistrate, Madurai. Thereafter, the Defendant Bank has issued Sale Notice dated 06.07.24 by fixing auction on 01.08.2024. The Bank has failed to issue 30 days clear notice to the Applicant. It is further submitted that the Defendant Bank not affixed the Possession Notice and the Sale Notice on the conspicuous part of the property and not published the same in two newspapers. In Sale Notice, the Bank has not mentioned outstanding balance payable by the Applicant. It is the violation of Rule 8(7) (b) of the Security Interest (Enforcement) Rules 2002.

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It is further submitted that the Defendant Bank fixed the reserve price for a sum of Rs. 98.00 Lakhs without obtaining proper Valuation Report from the Panel Valuer. In fact the value of the mortgaged property is worth more than Rs. 2.00 Crore, which is against Rule 8(5) of Security Interest (Enforcement) Rules 2002. Further, the outstanding payable by the Applicant is only a sum of Rs. 22,83,202.87p. Hence, being aggrieved by the said Sale Notice dated 06.07.2024, the Applicant filed this Application on the following among other grounds.

Page 2 of 11

SA No.487/2024

Main Grounds :-

The Defendant Bank issued Sale Notice dated 06.07.24, fixing auction sale on 01.08.24, which is arbitrary in nature and liable to be set aside.

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The Defendant failed to follow the procedures contemplated in SARFAESI Act & Rules.

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The Defendant Bank failed to publish the Sale Notice U/s. 13(4) and Rule 8(6) of Security Interest (Enforcement) Rules 2002 is bad in law as the claims and demands made therein are not tenable in law.

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The Defendant wrongly classified the Applicant's loan account as NPA.

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The Defendant has failed to register with the Central Registry as per section 20 of the SARFAESI Act.

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The Defendant failed to publish the Possession Notice in Newspapers, failed to affix it on the property and failed to serve the same to all the parties concerned.

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The Defendant Bank failed to affix the Sale Notice on the property and failed to publish the same in two leading newspapers.

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The Defendant has undervalued the properties and brought the same for sale against the principles of natural justice. The Defendant has not obtained Valuation Report before fixing reserve price.

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The above said property is all separated one i.e. residential property, 2 shops and one Marriage Hall. The value of the 2 shops is more than the liability of the Applicant. But the Defendant Bank has deliberately and purposefully brought it for auction entire secured assets with intention to sell the properties in a through away price.

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The Defendant has charged excessive rate of interest than the agreed rate of interest.

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Page 3 of 11

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SA No.487/2024

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Description of the Immovable Property

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In Madurai District, Madurai South Registration District, Thirupparankundram Sub-Registration District, Madurai South Taluk, now Madurai West Taluk, Vadapalanji Village, Patta No. 233, Punja S.No. 126B/4C2G measuring 0.04.0 ares, i.e., 10 cents, at present measuring 0.03.08 ares i.e., 4093 square feet, in that after leaving on the Northern portion measuring 2738 sq.ft. remaining on the Southern portion measuring 1355 sq.ft., Patta No. 893, S.No. 126B/19 measuring 0.03.0 ares, i.e., 7^1/2 cents, in that on the Eastern portion measuring 5 cents, i.e., 2180 sq.ft. and S.No. 126B/4C2H1 measuring 0.04.0 ares, i.e., 10 cents, in that on the Northern portion measuring 1778 sq.ft., totally measuring 5313 sq.ft., together with building situated within the following boundaries:

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North : Property of Jeyakodi East : Vadapalanji Road South : Property of Pandi West : Western portion in S.Nos. 126B/18, 126B/19 & 126B/20

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Measurement: East – West on the Northern side 125 feet & Southern side 125 ft. and North-South on the Eastern side 44 ft. & Western side 41 ft. Totally 5313 sq.ft., together with building, all rights, amenities and affixtures etc.

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The Applicant has submitted the following List of documents in support of his claim in the SA, which are as follows:

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INDEX TO TYPED SET OF PAPERS

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S.No.	Date	DESCRIPTION
1	21.08.2021	Demand Notice U/s. 13(2) of the Act
2	25.11.2021	Possession Notice Paper Publication in Tamil daily
3	05.07.2024	Letter given by Advocate Commissioner to the Applicant
4	06.07.2024	Impugned sale Notice
5	18.07.24	Letter sent by the Applicant to the Defendant

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Page 4 of 11

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SA No.487/2024

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3 . On the other hand, the Counsel for the Defendant Bank appeared before this Tribunal and filed Vakalat, Reply Statement, Typed set & Additional typed set of papers in which they submitted that the Applicant had categorically admitted the borrowal of loan & execution of loan documents & creation of mortgage. Further, the borrower had failed to operate the loan account as agreed and promised. Despite sufficient opportunity, borrower failed to regularize the loan account and with no other alternative the Bank has rightly classified the account as NPA on 31.05.2021. Thereafter, the Bank has issued the Demand Notice on 21.08.2021 to the borrower and guarantors and the same was duly sent through the registered post to the address of the borrower. But the Applicant has not sent any reply to the Demand Notice. Then the Bank had issued Possession Notice on 25.11.2021 which is received by the Applicant. The Possession Notice was published in two newspapers and affixed on the property also.

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It is further submitted that Sale Notices dated 13.01.22, 05.03.22, 29.04.22, 23.03.23, 07.07.23, 11.08.23 & 17.10.23 issued by the Defendant Bank, which were never challenged by the Applicant. Further, the Defendant Bank had filed section 14 Application before Ld. CJM in Crl.M.P.No. 558 of 2022 and obtained orders on 08.06.2022. The Advocate Commissioner had issued notice to the borrower and Physical Possession of the Marriage Hall was taken on 18.07.24, leaving one ATM premises, one shop and 5 rental houses as there was innocent tenant in the secured asset of the Bank. Thereafter, the 8^th Sale Notice was issued by the Defendant Bank on 06.07.2024 and the same was delivered to the borrowers and published in two newspapers. The Applicant challenged the Impugned Sale Notice in this present SA and obtained the conditional Stay order dated 30.07.2024.

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The Defendant Bank denied all the grounds raised by the Applicant. It is further submitted that the borrower had failed to operate the loan account as agreed and promised. The Defendant Bank had followed all the SARFAESI Procedures. The Bank had registered with CERSAI and uploaded in the website. The Bank had never obtained signature in blank documents from the Applicant. The Bank had further submitted that Possession Notice was issued by the Defendant Bank on 25.11.2021 and the same was published in two news papers, the Possession Notice was delivered to the borrower and guarantors and it is also affixed in the property. The Defendant Bank obtained Valuation Report for the secured asset and reserve price was fixed upon the report. The Mortgage was made in favour of the Defendant Bank. The loan account of the Applicant is classified as NPA. The Bank is empowered under SARFAESI Act to proceed against the secured

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Page 5 of 11

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SA No.487/2024

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asset. The Bank had not charged any interest rather that is agreed by the borrower. All the payment made by the borrower is properly given credit.

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It is further submitted that the Applicant had paid Rs. 19,72,000/- by various payment and purposefully he had failed to pay the expenses with regard to Paper Publication of SARFAESI Notices, Valuation Report, Encumbrance certificate for the secured asset, Advocate Commissioner remuneration, Advocate fees for the cases filed by the Applicant and security charges for the secured asset. Further, it is submitted that 18% of GST to be deducted for the value of the expenses incurred by sale of secured assets by the public auction. The Bank is under statutory requirement to take earnest attempts to recover the loan outstanding. The Possession as well as the Sale Notices are perfectly valid and sustainable in law and there is absolutely no error in the said notices.

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Therefore, it is prayed that this Hon'ble Tribunal may be pleased to dismiss the Application with cost and thus render justice.

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Type set filed by the Defendant Bank

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S.No.	Date	Events
1	21.08.2021	DemandNoticewith ADcards
2	25.11.2021	Possession Noticewith ADcards
3	25.11.2021	Paper Publications of Possession Notice
4	30.11.2021	Photographsforsymbolic possession
5	08.06.2022	Order inCrl MP558 of2022
6	06.07.2024	Sale Notice with AD Cards
7	08.07.2024	Photographs for affixture of Sale Notice
8	09.07.2024	Paper Publication of Sale Notice
9	31.01.2025	Expenses split up details

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Additional Typed set filed by the Defendant Bank

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S.No.	Date	Events
1	12.08.23	Bill Copy
2	21.10.23	Bill Copy
3	21.10.23	Bill Copy
4	09.07.24	BillCopy
5	24.07.24	Bill Copy
6	24.07.24	Bill Copy

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4. ON THE BASIS OF ABOVE PLEADINGS THE POINT WHICH ARISES FOR CONSIDERATION IS:-

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Page 6 of 11

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SA No.487/2024

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WHETHER THE APPLICANT IS ENTITLED TO GET THE RELIEFS AS PRAYED FOR?

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5 . Having heard the parties and after going through the entire documents available on the records, this Tribunal find that there is no dispute between the parties with regard to the availment of loan facilities by creating equitable mortgage on his property. In this case, the Applicant contended that initially the Applicant has repaid the monthly installments regularly however, due to the impact of Covid-19, there was default in repayment and hence the Defendant Bank has initiated recovery proceedings and classified the Applicant's loan account as NPA on 31.05.2021 and issued Demand Notice on 21.08.2021 U/s.13(2) of SARFAESI Act.

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I have verified the documents produced by the Defendant Bank and the Bank submitted that since the Applicant failed to repay the loan as agreed to and hence the loan account was declared as NPA. Thereafter, the Defendant Bank was constrained to issue Demand Notice dated 21.08.2021 U/s. 13(2) of SARFAESI Act for a sum of Rs. 19,67,933.73p (Rupees Nineteen Lakhs Sixty seven Thousand Nine Hundred Thirty Three and Paise Seventy Three only). Further, in the typed set of papers filed by the Defendant Bank, I find that the Bank has produced the copies of acknowledgement cards at page nos. 4 & 5 as an evidence for having sent the copy of Demand Notice to the Applicant, which proves that the Applicant has received the Demand Notice. However, the Applicant has not replied to Demand Notice U/s. 13(3-A) of SARFAESI Act and failed to give any representation to the Defendant Bank.

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Further, I find that the Defendant Bank had issued Possession Notice U/s. 13(4) of SARFAESI Act on 25.11.2021. The Applicant in his averment stated that the Bank has failed to issue symbolic Possession Notice to the Applicant. But, I find that the Defendant Bank has filed AD Card proof for having sent the copy of Possession Notice to the Applicant by Post vide the

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Page 7 of 11

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SA No.487/2024

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Typed set at page nos. 8 & 9. I also find that the Bank has produced the xerox copies of Paper Publication of Possession Notice in two newspapers one in English and another in Tamil (Bank's Typed set of papers at page nos. 12 & 13). But, the copies provided do not exhibit the details, such as Name of the Newspaper, date of publication. The Bank has only filed the Possession Notice copies in Tamil & English versions and no evidence to show that it was originally the paper publication copies. Further, the bank has filed photos at page nos. 10 & 11 of Bank's Typed set of papers, but the copies provided are not clear to verify the genuineness of the documents to show that the Possession Notice is originally affixed on the Impugned property. Thus, I do not find that the Defendant Bank has strictly followed the SARFAESI procedures, while issuing Possession Notice to the Applicants. The Rule 8(1) (2) & (2-A) of the Security Interest (Enforcement) Rules 2002 clearly says:-

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"8. Sale of immovable secured assets.

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(1) Where the secured asset is an immovable property, the authorized officer shall take or cause to be taken possession, by delivering a possession notice prepared as nearly as possible in Appendix IV to these rules, to the borrower and by affixing the possession notice on the outer door or at such conspicuous place of the property."

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(2) The possession notice as referred to in sub-rule (1) shall also be published in two leading newspaper, one in vernacular language having sufficient circulation in that locality, by the authorized officer.

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(2-A) All notices under these rules may also be served upon the borrower through electronic mode of service, in addition to the modes prescribed under sub-rule (1) and sub-rule (2) of rule 8.] "

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Hence, this issue is decided in favour of the Applicant.

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Thereafter, the Bank had obtained an Order dated 08.06.2022 passed by the Ld. CJM, Madurai for taking Physical Possession of the Property and an Advocate Commissioner has also been appointed who has taken the Physical Possession of the secured asset on 18.07.2024. The Bank had issued seven Sale Notices before issuing the Impugned Sale Notice dated 06.07.2024 and sale was fixed on 01.08.2024. I perused the documents filed by the Defendant Bank and I find that the Defendant Bank has filed

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Page 8 of 11

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SA No.487/2024

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the copy of Sale Notice dated 06.07.2024 (page nos. 18 & 19 of Bank's typed set). The Applicant in his averment submitted that the Defendant Bank has not served the Impugned Sale Notice for all parties concerned and failed to affix the Sale Notice on the property as well as failed to publish the same in two leading newspapers. I perused the documents and I find that the Bank has produced two returned undelivered postal covers with remarks 'unclaimed', 'Door Locked' (page nos. 19A, 19B, 19C & 19D of Bank's typed set of papers). I also find that the Bank has produced the xerox copies of Paper Publication of Sale Notice in two newspapers one in English and another in Tamil (page nos. 21 & 22 of Bank's typed set). But, the copies provided is not clear and do not exhibit the details, such as Name of the Newspaper, date of publication. Further, at page no.20, 20A & 20B of Bank's typed set, the Bank has submitted the photo as an evidence to show the affixture of the Sale Notice on the conspicuous part of the property. But the copies provided are not clear to verify the genuineness of the documents to show that the Sale Notice is originally affixed on the Impugned property.

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Thus, I find that the Defendant Bank has not followed the Rule 8(6) & (7) of the Security Interest (Enforcement) Rules 2002, which clearly says that,

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"Rule 8(6) & (7) in the Security Interest (Enforcement) Rules, 2002:-

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"( 6 ) The authorized officer shall serve to the borrower a notice of thirty days for sale of the immovable secured assets, under sub-rule (5): [Provided that if the sale of such secured asset is being effected by either inviting tenders from the public or by holding public auction, the secured creditor shall cause a public notice in the Form given in Appendix IV-A to be published in two leading newspapers including one in vernacular language having wide circulation in the locality.]"

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"( 7 ) [Every notice of sale shall be affixed on the conspicuous part of the immovable property and the authorised officer shall upload the detailed terms and conditions of the sale, on the web- site of the secured creditor, which shall include;

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( a) the description of the immovable property to be sold, including the details of the encumbrances known to the secured creditor;

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(b) the secured debt for recovery of which the property is to be sold;

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(c) reserve price of the immovable secured assets below which the property may not be sold;

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Page 9 of 11

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SA No.487/2024

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(d) time and place of public auction or the time after which sale by any other mode shall be completed;

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(e) deposit of earnest money as may be stipulated by the secured creditor;

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(f)any other terms and conditions, which the authorized officer considers it necessary for a purchaser to know the nature and value of the property.]"

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Hence, this issue is also decided in favour of the Applicant.

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Further, the Defendant Bank has failed to file the Valuation Report, since it is mandatory as per Rule 8(5) of the Security Interest (Enforcement) Rules, 2002, which says:-

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"(5) Before effecting sale of the immovable property referred to in sub-rule (1) of rule 9, the authorized officer shall obtain valuation of the property from an approved valuer and in consultation with the secured creditor, fix the reserve price of the property and may sell the whole or any part of such immovable secured asset by any of the methods provided therein" .

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I also find that during the pendency of the case, this Tribunal has granted a conditional stay order dated 30.07.24 for a sum of Rs. 11,43,000/- to be paid in three installments by the Applicant, the Applicant has paid two Installments. However, during the adjudication the Counsel for the Defendant Bank has informed this Court on 16.10.2024 that Sale was not successful for want of bidders in respect of the impugned Sale Notice dated 06.07.2024 and to this effect the bank has filed a Memo in Diary No. 5916/24 and requested this Court to dispose the SA as infructuous as the Sale did not happen. Hence, this case was heard on merit.

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Further, the Applicant has not placed any material evidence before this Tribunal to substantiate their claim that the classification of loan account as NPA is wrong and rate of interest has been charged excessively against the guidelines of RBI.

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The Applicant has no doubt being a defaulter is liable to pay the loan amount to the Defendant Bank and the Bank has been given ample power to

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Page 10 of 11

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SA No.487/2024

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recover the outstanding loan amount from the borrower by invoking the SARFAESI Act and without the intervention of any Court. But, it shall not allow the Bank to sell the property of the Applicant without following the due process of law strictly.

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However, in this case sale was not held for want of bidders. Hence, this SA No. 487 of 2024 is disposed of with direction to the Defendant Bank not to include all the expenditures incurred in issuance of Impugned Sale Notice dated 06.07.2024 in the loan account of the Applicant.

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The Defendant Bank is at liberty to initiate fresh action against the Applicant as per the SARFAESI Acts & Rules. Consequently, all pending IAs (if any) are also disposed of. No costs.

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Dictated to PA (DK), taken down, transcribed, typed by her, corrected and pronounced by me in the Open Court in this the 25^th April, 2025.

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sd/- (SEEMA SINHA) PRESIDING OFFICER

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Uploaded on 08.05.2025

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Page 11 of 11

V Jegan v. Tamilnad Mercantile Bank Limited

Case brief

What is this about?

What did the court decide?

V Jegan v. Tamilnad Mercantile Bank Limited

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

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Case details

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