Dismissed

Venu v. Punjab National Bank

DRT5 Aug 2025SA/494/2022

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal dismissed the Securitization Application challenging an e-auction sale of mortgaged properties. The court held that the applicant lost the right of redemption after the auction notice was published and failed to raise objections to prior statutory notices within the limitation period.

What did the court decide?

The Securitization Application is dismissed; the e-auction sale and issuance of sale certificates are upheld as valid measures.

Venu versus Punjab National Bank — Banking and Recovery | DRT (2025)

SA No.494/2022

05.08.2025

IN THE DEBTS RECOVERY TRIBUNAL-III, CHENNAI

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Dated this the 05^th day of August, 2025

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Present: SMT. S.V. GOWRAMMA

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Presiding Officer

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SA No. 494 of 2022

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Venu Srinivasan (PAN No.ADYPV6287H/09.02.1984) S/o. Shri Srinivasan No.46, 1^st Main Road Indira Nagar, Adayar Chennai – 600 020 ….Applicant

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-Vs-

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The Authorized Officer (PUNB0361200) Punjab National Bank, Circle Sastra Centre Second Floor Spencer Plaza, 769, Anna Salai Chennai 600 002 …Respondent

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Counsels on record / appeared:

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Counsel for Applicant : M/s. S. Seshadri Counsel for respondent ` : M/s. R. Umasudhan

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ORDER ON SA 494 /2022

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The present Securitization Application [SA] is filed under sub section [1] of S.17 of the Securitization And Reconstruction of Financial Asset and Enforcement of Security Interest Act,2002 (for short the ‘Act’) challenging the action and the measure taken by the secured creditor under the Security Interest Enforcement Rules, 2002 [for short the Rules].

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05.08.2025

The applicant has filed the present SA challenging the e-auction sale held on 14.10.2022 pursuant to the Sale notice dated 26.09.2022 and the outstanding amount due as per Sale notice is Rs.1,56,35,549.60/-

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3. Pleadings of the applicant:

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3.1 The applicant along with his family is running a business “Leo Retail Concepts” and also in the business of manufacture and sale of coffee seeds and powder under the brand name “Leo Coffee”. The applicant had approached the erstwhile Oriental bank now amalgamated as Punjab National Bank and availed Cash Credit and Term Loan limit of Rs.1,56,00,000/-. The applicant was repaying the loan regularly up to December 2019. Due to default for various reasons, the loan account was classified as NPA on 28.02.2019.

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3.2 After classifying the account as NPA, bank has proceeded further and issued Section 13(2) Demand Notice dated 01.03.2019 calling upon the applicant to pay the outstanding amount within 60 days. Further the Section 13(4) Possession notice dated 24.06.2019 was also issued in spite of applicant upgraded the account as standard asset.

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3.3 The respondent yet again classified the account as NPA on 01.09.2019 and issued Section 13(2) Demand Notice dated 17.09.2019, it is seen that the liability is reduced to Rs.1.99 crores to Rs.1.51 crores. Further the Section 13(4) Possession notice dated 18.10.2019 was also issued to take the symbolic possession of the property and Sale notice dated 29.02.2020 for the proposed sale on 04.04.2020.

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3.4 It is contended that the respondent issued 2^nd sale notice dated 22.12.2021 for the proposed sale on 28.01.2022 and the sale didn’t materialize for want of bidders. The applicant received the impugned Sale notice dated 26.09.2022 scheduling the sale to be held on 14.10.2022. The applicant submitted a proposal for one time settlement and the respondent accepted the offer made by the applicant, vide letter dated 02.02.2022. As the applicant had expressed his willingness and accepted the offer of Rs.74.00 lakhs along with upfront payment of Rs.10.05 lakhs and bank called upon the applicant to pay the balance amount of Rs.63.95 lakhs in two tranches on or before 31.08.2022.

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3.5 The applicants failed to honor the OTS amount and were shocked to receive the Sale notice dated 26.09.2022 fixing the sale on 14.10.2022. Applicant approached the bank on 13.10.2022 along with better offers for settlement and also made a payment of Rs.10.00 lakhs to show his bonafides under OTS.

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3.6 It is contended that the respondent bank has divulged the details of the highest bidder. The Sale notice was issued by the respondent before the expiry of 15 days from the date of receipt of sale notice dated 26.09.2022 which was dispatched on 30.09.2022 and received by the applicant on 01.10.2022 for the sale on 14.10.2022.

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3.7 In the grounds, it is contended that the Demand Notice dated 19.09.2019 contains incorrect particulars and does not reflect the correct amount due. The respondent has not delivered the Possession notice

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which is in violation of Rule 8 of Security Interest (Enforcement) Rules, nor published in two Newspapers nor affixed on the property, hence the Sale notice issued by respondent suffers from various infirmities as it is not issued in accordance with Acts and Rules. Respondent has not registered the mortgage property in Central Registry.

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3.8 The respondent have grossly under-valued the property, the velachery property was sold at Rs.32.00 lakhs and the Purasawalkam property was sold at Rs.56.00 lakhs. Hence prays to set aside the alleged sale dated 14.10.2022 pursuant to the sale notice dated 26.09.2022.

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4. Objections of the respondent bank:

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4.1 The respondent bank in their counters submits that M/s Leo Retail Concepts is a proprietorship concern, represented by its proprietor Mr. Venu Srinivasan is the applicant here in. The borrower had availed financial cash credit facility of Rs.100.00 lakhs vide sanction letter dated 02.08.2013 for Rs.65.00 lakhs which was subsequently enhanced to Rs.100.00 on 01.10.2015, agreeing to repay the loan amount at the rate of 12.25% p.a.,

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4.2 Further Mr. B. Srinivasan Deviah created security by mortgaging his immovable properties namely,

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a) Shop No.52/2, Flat No.B-5, Door No.308, Velachery Main Road, Chennai – 600 042

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b) Shop No.25/3, Anna Pillai Street, George Town, Chennai – 600 001

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c) Shop No.359, Puraisawalkam High Road, Chennai – 600 007 in favour of the respondent.

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4.3 As the borrower defaulted in repayment of the principal and interest which resulted in classifying the loan account as NPA on 28.02.2019, respondent bank has issued Section 13(2) Demand Notice dated 01.03.2019 calling upon the borrower to pay the outstanding amount within 60 days. As the borrower and guarantor failed to comply with the demand as stated in the Demand notice, the respondent bank took the symbolic possession on 24.06.2019

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4.4 Subsequently the borrower had approached the respondent with the request to upgrade the loan account which was permitted by the respondent. Though the loan account was upgraded, borrower failed to service the interest and repayment. Hence the loan account was yet again classified as NPA on 31.08.2019. After classification, bank have issued Section 13(2) Demand Notice dated 17.09.2019 calling upon the borrower and guarantor jointly and severally to repay the entire outstanding amount of Rs.1,51,06,593/- which is served to the applicant.

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4.5 As the applicant failed to make the payment, bank has proceeded further and issued Section 13(4) Possession notice dated 18.12.2019 which was served as per the postal track report in Page No.6 and 7. Further the bank have obtained the valuation report before putting the property for sale vide e auction sale notice dated 29.02.2020 and 22.12.2021, however the sale didn’t took place.

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4.6 Thought the borrower had approached the respondent to discharge the liability under OTS which was permitted by the respondent bank on 22.02.2022 for an amount of Rs.74,00,000/- to be paid on or before 31.08.2022 which the applicant has failed and neglected to pay the outstanding amount under OTS. Hence the bank has issued e auction sale notice dated 26.09.2022 fixing the sale to be held on 14.10.2022

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4.7 Subsequently all the three items of the secured assets were sold, the 1^st item was sold for Rs.29,65,000/- and purchased by Mr. Kamalkannan Sundaravel, 2^nd item was sold for Rs.42,40,000/- and purchased by Mr. Munna Anand. Though the Auction purchasers have remitted the sale consideration amount and Sale certificate is also issued in favor of the auction purchaser.

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4.8 The applicant has filed the present SA challenging the Sale notice dated 26.09.2022 where in the sale is already concluded and issuance of Sale Certificate is also completed. The applicant didn’t question the Section 13(2) Demand Notice dated 17.06.2019, Section 13(4) Possession Notice dated 18.12.2019 within the period of limitation and lost the right of objection and questioning of Sale notice dated 26.09.2022 could not stand.

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4.9 Further the applicant is entitled to question each and every measures taken by the respondent from the issuance of statutory notices and failed to do so within 45 days, hence the present SA is liable to be dismissed. The Hon’ble Supreme Court in the case of “ Arce Polymers

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Private Limited, Vs Alphine Pharmaceuticals and others, as reported in 2022 (2) SCC, Page 221 ” as held that the applicant has not challenged the Section 13(4) Possession notice is estopped by his conduct to question the Demand Notice and Possession Notice.

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4.10 The reserve price fixed for the secured asset is correct, applicant is attempting to portray a colorable picture as if the reserve price fixed by the respondent is very low by comparing the valuation report dated 10.06.2013 and 11.06.2013. The value of the secured asset depreciated due to age of the building and notional value of the UDS.

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4.11 The Sale notice dated 26.09.2022 was served on the applicant and published in two Newspapers, one in “The New Indian Express” (English) and another in “Dinamani” (Tamil) both dated on 28.09.2022, the sale notice is also affixed on the property, the sale is also successfully held on 14.10.2022 all the three items of the secured assets were sold. The Auction purchaser has remitted the entire sale consideration amount and Sale certificate is also registered in favor of the Auction purchaser. Hence the bank has complied with all the measures as required under the Acts, and prays for dismissal of the present SA.

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Heard both sides of the Counsels and perused the records of the case.

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5.1 It is manifest from the records that the applicant is the borrower who had availed Rs.65.00 lakhs vide sanction letter dated 02.08.2013 which was subsequently enhanced to Rs.100.00 on 01.10.2015 with an

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rate of interest at 12.25% p.a., There is no dispute with regard to the creation of security by way Deposit of Memorandum of Deposit of Title Deeds;

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a) Memorandum of Deposit of Title Deeds executed by Mr. B. Srinivasan Devaiah to and in favour of Respondent bank which is registered as Doc.No.3788 of 2013 before the Sub Registrar Office of Purasawakkam.

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b) Memorandum of Deposit of Title Deeds executed by Mr. B. Srinivasan Devaiah to and in favour of Respondent bank which is registered as Doc.No.5547 of 2013 before the Sub Registrar Officer of Velachery

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c) Supplementary Memorandum of Deposit of Title Deeds executed by Mr. B. Srinivasan Devaiah to and in favour of Respondent bank which is registered as Doc.No.7488 of 2014 before the Sub Registrar Office of Velachery.

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5.2 The mortgaged properties is also registered in Central registry which is evident from the CERSAI report produced by the bank at Page No.68 to 69. Due to default in the repayment, the loan account of the applicant was classified as NPA on 28.02.2019.

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5.3 After classification of the account as NPA, bank has proceeded and issued Section 13(2) Demand Notice dated 01.03.2019 calling upon the borrower and guarantor to pay the entire outstanding amount, as there is no representation nor objections raised by the borrower nor guarantor nor

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cleared the liability within 60 days from the date of receipt of this notice, respondent bank has proceeded further and issued the Section 13(4) Possession notice dated 24.06.2019 and took symbolic possession of the property.

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5.4 At the request of the applicant, the loan account of the borrower was upgraded and became standard. Subsequently the borrower defaulted again in repayment, hence the loan account of the borrower was classified as NPA again on 31.08.2019.

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5.5 After classifying the account as NPA, the respondent bank has proceeded further and issued the 2^nd Demand Notice under Section 13(2) dated 17.09.2019 which is duly served to the applicant as per the postal tracking report produced by the bank at Page No.39. It is pertinent to note that the total outstanding amount was reduced from Rs.1.99 crores to Rs.1.51 crores.

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5.6 The respondent bank has proceeded further and issued Section 13(4) Possession notice dated 18.10.2019; affixed the Possession notice dated 18.10.2019 on the conspicuous part of the property and duly published in two Newspapers, one in “The New Indian Express” (English) and “Dinamani” (Tamil) both dated on 24.12.2019. The respondent has issued Sale notices dated 29.02.2020 fixing the sale on 04.04.2020 and 22.02.2021 fixing the sale on 28.01.2022, however sale could not take place for want of bidders.

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5.7 The applicant / borrower approached the respondent to discharge the liabilities under OTS vide letter dated 22.02.2022. The OTS was granted by the respondent bank for an amount of Rs.74,00,000/- and the applicant had paid Rs.10.00 lakhs towards the OTS proposal, balance Rs.63.95 lakhs to be paid on or before 31.08.2022. Subsequently the borrower did not adhere to pay the balance amount within the stipulated time, hence the OTS proposal was cancelled vide letter dated 01.09.2022.

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5.8 The respondent bank as a secured creditor has issued 3^rd Sale notice dated 26.09.2022 fixing the sale on 14.10.2022 before putting the property for sale bank has obtained the valuation report from an authorized valuer. The valuation report is produced at page No.30 to 61 which reflects the description of the property and Forced sale value of the 1^st property is Rs.16,12,000/- and fixed the Reserve price of Rs.20,15,000/-, the Forced sale value of the 2^nd property is Rs.33,13,414/- and fixed the Reserve price of Rs.41,41,768/-.

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5.9 The Sale notice is also sent through RPAD and duly received by the applicant which is evident from the Acknowledgement card produced by the bank at Page No. 15-A. The sale notice was affixed on the property as is evident from the photographs produced by the bank at Page No.16 to 19. Further the Sale notice is also published in two Newspapers, one in “The New Indian Express” (English) and another in “Dinamani” (Tamil) both dated on 28.09.2022.

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5.10 The applicant vide letter dated 13.10.2022 and e-mail dated 17.10.2022 informed the respondent that they are willing to remit the balance amount in the OTS and requested for a fresh OTS proposal. In their e-mail, they offered Rs.24,00,000/- for the 1^st property and Rs.46,00,000/- for the 2^nd property mentioned in the Sale notice dated 26.09.2022. However the sale was successfully held, 1^st property was sold at Rs.29,65,000/- for the highest bidder Mr. Kamalakannan and the 2^nd property was sold at Rs.42,40,000/- for the highest bidder Mr. Munna Anand.

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5.11 The Sale certificate dated 31.10.2022 is issued in favor of Mr. Kamalakannan which is registered as Doc.No.2391/2011 and Sale certificate dated 03.11.2022 is issued in favor of Mr. Munna Anand which is registered as Doc.No.3320/1994.

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5.12 Further the respondent has filed a petition before Chief Metropolitan Magistrate, Egmore in Crl.M.P.No.3583/2023 dated 10.04.2023. The petition came to be allowed by the Hon’ble CMM, Egmore by appointing an Advocate Commissioner Mr. K. Velavan to take the symbolic possession of the property.

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5.13 Though the applicant vide letter dated 13.10.2022 and e-mail dated 17.10.2022 had informed the respondent that they are willing to remit the balance amount in the OTS and requested for a fresh OTS proposal is a day prior to sale scheduled on 14.10.2022 and their e-mail dated 17.10.2022 which is 3 days after sale is held and also subsequent

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to the paper publication of sale notice dated 26.09.2022 which is published on 28.09.2022, having lost the right of redemption under Section 13(8), the applicants has failed to make out a case to set aside the sale.

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5.14 Section 13(8) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) deals with the borrower's right to redeem the secured asset. This right is available until the date of publication of the notice for public auction or inviting quotations for the sale or transfer of the asset. If the borrower tenders the dues before this date, the secured asset cannot be transferred by the creditor

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5.15 The Hon’ble Supreme Court in the case titled Celir LLP v. Bafna Motors (Mumbai) (P) Ltd held that the borrower's right of redemption of mortgage under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) will get extinguished once the bank publishes an auction notice for the sale of the secured asset. It further held that the failure on the part of the borrower in tendering the entire dues before the publication of the auction notice as per Section 13(8) of the SARFAESI Act constituted an "extinguishment of right of redemption of mortgage"(para 63 of the judgment). Once the Section 13(8) stage was over and the auction is concluded, the borrower do not have any right of redemption under Section 13(8).

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5.16 Though the borrower intended to settle the liabilities under OTS, failed to adhere to the terms of settlement. Additionally applicant waived their right to redeem the property under Section 13(8)

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5.17 For the foregoing reasons, the present SA fails resulting the Sale notice dated 26.09.2022, sale held on 14.10.2022 and issuance of sale certificate dated 31.10.2022 and 03.11.2022 as valid measures initiated as prescribed under the Act and Rules made there under.

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Resultantly, SA 494/2022 fails. Accordingly SA stands dismissed. Interim Order granted, if any stands vacated, pending IAs are disposed of in terms of this final order. No order as to cost.

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Sd/-

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(S.V. GOWRAMMA) PRESIDING OFFICER, DRT-III, CHENNAI

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(Dictated to Steno (Mogesh), transcribed by him, corrected, signed and pronounced by me on this the 05^th day of August, 2025)

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ANNEXURES

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LIST OF DOCUMENTS PRODUCED BY THE APPLICANT

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Sl. No.	Description of Documents	Document No.
1.	Valuation report of Purasawalkam property 10.06.2013	A-1
2.	Valuation report of Velachery property 11.06.2013	A-2
3.	Demand Notice issued by OBC 01.03.2019	A-3
4.	Possession Notice issued by OBC 24.06.2019	A-4

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5.	Recall Notice issued by OBC 17.09.2019	A-5
6.	Possession Notice issued by OBC 18.12.2019	A-6
7.	Sale Notice issued by OBC 29.02.2020	A-7
8.	Sale Notice issued by PNB 22.12.2021	A-8
9.	OTS Letter issued by PNB 22.02.2022	A-9
10.	OTS Cancellation 01.09.2022	A-10
11.	Sale Notice with cover 26.09.20222	A-11
12.	Letter sent by Applicant to Respondent 13.10.2022	A-12
13.	Letter sent by Applicant to Respondent 13.10.2022	A-13
14.	Mail sent by Applicant to Respondent 17.10.2022	A-14
15.	Fact Sheet 27.10.2022	A-15

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LIST OF DOCUMENTS PRODUCED BY THE RESPONDENTS

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Sl. No.	Description of Documents	Document No.
1.	Photo copy of sanction letter by the respondent 02.08.2013	R-1
2.	Photo copy of sanction letter by the respondent 01.10.2015	R-2
3.	Photo copy of MODTD, registered as Doc.No.3788 of 2013, before the office of the SRO, Purasawalkam 24.09.2013	R-3
4.	Photo copy of MODTD, registered as Doc.No.5547 of 2013, before the office of the SRO, Velachery 24.09.2013	R-4
5.	Photo copy of Supplementary MODTD, registered as Doc.No.7488 of 2014, before the office of the SRO, Velachery 07.11.2014	R-5
6.	Photo copy of 13(2) notice issued by the respondent 17.09.2019	R-6
7.	Photo copy of the Postal Extract regarding proof of service 21.09.2019	R-7
8.	Photo copy of 13(4) notice issued by the respondent along with proof of service 18.12.2019	R-8
9.	Photo copy of affixture relating to 13(4) notice (two properties) 18.12.2019	R-9
10.	Photo copy of the publication of 13(4) notice by the respondent 24.12.2019	R-10
11.	Photo copy of the 1^ste-auction sale notice 29.02.2020	R-11
12.	Photo copy of the 2^nde-auction sale notice along with AD card 22.12.2021	R-12

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13.	Photo copy of the 3^rde-auction sale notice along with affixture 26.09.2022	R-13
14.	Photo copy of the publication of sale notice in English and Vernacular Dailies 28.09.2022	R-14
15.	Photo copy of the Ad card towards proof of service of e-auction sale notice	R-15
16.	Photo copy of the CERSAI Registration Extract	R-16
17.	Photo copy of the sale confirmation letter by the respondent issued to the auction purchaser 14.10.2022	R-17
18.	Photo copy of the letter by the borrower 22.10.2022	R-18
19.	Photo copy of the sale certificate 31.10.2022	R-19
20.	Photo copy of the sale certificate 03.11.2022	R-20
21.	Photo copy of the valuation report 17.11.2022	R-21

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SCHEDULE OF PROPERTIES

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Schedule:1

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All that piece and parcel of shop in the North East Portion of the Ground Floor measuring 260 sq.ft., including a share in common areas situated at corporation door No.52/2, Flat No.B-5, New Door No.308, Velachery, Chennai 600 042 comprised in Survey No.438/1 part at velachery village measuring an extent of 2 grounds 581 sq.ft., Velachery Taluk, Chennai district, being bounded.

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North by: Land belongs to P.T.Raghavan

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South by: Mettu Street East by: Velachery Main Road West by: Land belongs to P.S.Parthasarathy,

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Situated within the Registration District of South Chennai and Sub Registrar, Velachery.

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Schedule: 2

All that piece and parcel of land and building bearing Door No.259, (Old No.139/2), Purasawalkam High Road, Chennai 600 007 comprised in O.S.No.1098 Part, C.C.No.141, Old R.S.No.602 (Part, present

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R.S.No.602/2 at Purasawalkam Village measuring an extent of 224 sq.ft., perambur – purasawalkam taluk, Chennai District, being bounded by

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North by: Property belonging to Jaganatha Mudaliar

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South by: Pursawalkam High Road

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East by: Shop belongs to Jaganatha Mudaliar

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West by: Shop belongs to Parthasarathi Chettiar

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Situated within the Registration District of Central Chennai and Sub Registrar District of Purasawalkam.