Partly allowed

Dokka Venkata Satya Sivaram v. LIC Housing Finance Limited

DRT21 Jan 2025SA/50/2023

Case brief

AI extract

What is this about?

Tribunal set aside e-auction on 06.02.2023 due to failure to follow procedural rules regarding payment deadlines by the lender. Appellant sought quashing of enforcement measures. Auction pent sold to 3rd respondent without proper compliance with statutory time limits for accepting balance payment.

What did the court decide?

Securitization application allowed in part. E-auction sale set aside and partial bid amount of Rs.9,06,250/- along with interest to be refunded to 3rd respondent.

Dokka Venkata Satya Sivaram versus LIC Housing Finance Limited — Banking and Recovery | DRT (2025)

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IN THE DEBTS RECOVERY TRIBUNAL-II AT^HYDERABAD

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DATED THIS THE 21ST DAY OF JANUARY,2025

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PRESENT: SH. RAMESHWAR KOTHE,B.Com,^{L.LB.(Hons.), M'4.} PRESIDING OFFICER

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Securitization Application No.5O ot 2023

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Dokka Venkata Satya Sivaram S/o Dokka Subba Rao, Male Aged about 44 years, Occ:Employee R/o C/o U. Ramakrishna H.No.1-4-207l1, Plot No.147, Road No.6^East Opp. Sai Ram Clinic, New Maruthi Nagar Kothapet - 500035

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.......Applicant.

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Versus

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LIC Housing Finance Limited

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#201, 2nd Floor, Krishe Sapphire

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Hi-tech City Main Road, Near Image Hospital Madhapur, Hyderabad

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Rep by its Authorized Person

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Gorak Jagadeeshwari

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W/o Dokka Venkata Satya Sivaram, Female Aged about 47 years, Occ:EmPloyee

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R/o c/o Gorak Nagaraj

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H.No.4-221 2, Opp. Hanuman TemPle Gangaram, Chandanagar-500050

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N. Rama Reddy

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S/o N. Narayana Reddy

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Aged about Major, Occ:Business, Male R/o H.No. 1-7-1074/ L196, Flat No.C-424 Sri Datta Apartments, Musheerabad Hydera bad- 5000 20

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(R-3 impleaded as per order dt.21.02.2024 in IA No.3510/2023)

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... . .. .Respondents.

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: Sri N.V. Pruthvi Raju Counsel for the Applicant Sri P. Hari Prasad Counsel for 7't Respondent : Sri P.S.N. Ravindra Counsel for i'd Respondent : 2'd Respondent : Ex Parte l,l\wr -rir -^.''

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SA No.50/2023

.:ORDERI-

The Applicant filed the^present Securitisation^{Application u/s.17} of the Securltization and Reconstruction of^Financial Assets^and Enforcement of Security Interest Act, 2002^(hereinafter "Act" for short) to set aside all measures initiated by the 1't^respondent under Secs.13(2) and 13(4) including auction held on 06.02.2023^pursuant to e-auction sale notice dated 03.01.2023 and taking^physical possession of the SA schedule property.

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The case of the applicant as^per averments of the application, in brief, is that the applicant and 2nd respondent are estranged husband and wife. The applicant and 2nd respondent^purchased the SA schedule^property in the name of 2nd respondent by taking loan from the 1.t respondent as co-borrowers. He filed FCOP No.175 of 2020 before learned Family ludge, Secunderabad for divorce and declared the schedule^property herein as his^property since it was fully funded by him and instalments were being^paid. The applicant is^{not residing} the said property whereas 2nd respondent is living there. The 1st respondent never sent any notice such as demand notice u/s^13(2), possession notice u/s 13(4) and the possession notice was never affixed on the^property and^published in the two^{leadingnewspapers} as per Security Interest (Enforcement) Rules, 2002^("Rules" hereinafter). Through well wishers he came to know about impugned e-auction sale notice dated 03.01.2023 and^proposed auction on 06.02.2023. Prior to auction sale notice, no^notice u/r 8(6)^{was issued} providing 30 days period to redeem the property. The e-auction sale notice was neither^published in leadings newspapers of Engllsh and vernacular languages and nor affixed on the subject property. The property was undervalued and reserve price fixed at Rs.25.60 lakhs is far less than its worth whereas, the total due is only around Rs.8.22

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sA No.50/2023

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lakhs as per possession notice. The 3'd respondent-auction purchaser did not pay the sale consideration as per time stipulated under Rules 9(3) and 9(4) and till date 1st respondent has not issued sale confirmation letter nor sale certificate. The appllcant has been deprived of raising objections to the demand notice u/s 13(34) and exercising right of redemption due to failure of 1't respondent in following due procedure of law. Hence this SA.

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The 1st respondent filed reply statement along with list of documents. The submlsslons, briefly, are that a loan of Rs.10.79 lakhs was sanctioned to applicant on 30.12.2005 which was repayable in 240 monthly instalments of Rs.13,381/- each. As the applicant commltted default in repayment, the account became NPA and consequently SARFAESI measures came to be initiated by issuing demand notice dated 18.12.2021 u/s 13(2) fot Rs.7,22,467.03^ps and the notice was served on the applicant. As not^payment was made withln 60 days, possession notice u/s 13(4) was issued on 26.04.2022 and published in 'Mana Telangana' and 'The Business Standard' Telugu and English newspaperc on 30.04.2022. In fact, the applicant cooperated in taklng physical possession of the^property by standing as witness to the Panchanama dated 07.11.2022^prepared by the advocate commissioner appointed in Crl.MP No,80/2022 by learned Chief Metropolitan Magistrate, lyedcha l-Malkajgiri District. The^Rule 8(6) notice was issued and pasted on the^property. The e-auction sale notice was^published in 'The Hindu' and 'Eenadu' English and Telugu newspapers respectlvely on 03.01.2023. The 3'd respondent stood as successful bidder in the auction held on 06.02.2023 at Rs.36,25,000/and he^paid 25Vo bid amount. The^petitioner sent notice on Whatsapp on 06.02.2023 in the evening informing about filing-gf the SA.^The

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//,\Y/-,+" / /./ }. (-,/

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SA No'50/2023

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present SA is filed only to evade^payment of^{outstanding dues and} drag on the litigation.^{Hence the SA is liableto be dismissed.}

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The 3d respondent-auction^{purchaser filed reply statement} submitting, inter alia, that^{he stood as successfulbidder in the auction} held on 06.02.2023. After^{excluding 10% EMD,he paid15olo of bid} amount on 07,02.2023 as^{the banking hours were over on} 06.02.2023. He did not^{paY 75o/obid amount on the advice of 1st} respondent and the 1st^{respondentvide letter daled 20.02.2023} refused to accept^payment of^{balancebid amount outcomeof the SA.} The 3'd respondent^has not^{violatedeitherRule9(3) or 9(4)hence} amount^paid by him cannot^{be forfeited.The 3'd respondent is a} retired employee and not in a^{position to be involvedin the legal} litigation. He is not^{interestedin the property anymoreand hencethe} amount of 25olo bid amount^{paid by him togetherwithinterest.}

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The 2nd respondent^was set ex^{parte vide docket order dated} 26.09.2023 as called absent^{and no representation despite notice.}

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Learned counsel for appllcant reported^{no oral arguments.} Heard learned counsel for the 1st^{respondentand learnedcounselfor} the 3'd respondent. Perused the^{written argumentsfiled for 1't} respondent and 3'd respondent.^{Also perusedthe material documents} brought on record by the^parties.

¶38

The learned counsel for the applicant,^{through his written} arguments, contends that the^{1st respondent failed to substantiateits} claim over the schedule^{property. The letter daled 20.12.2022cleatly} dlscloses that there is no^{MoDTexecuted.There is no security interest} created. The security interest, if any, is not^{registeredwith Central} Registry and hence the 1st respondent is not entitled^{to enforcethe} security as^per Sec.26-D of the Act.^{The1st respondentproceeded to}

,M,rf, (/

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SA No.50/2023

conduct auction without^{serving demandnotice,possession notice'} Rule3(6)noticeandWithoutaffixingthepossessionnoticeande. auction sale^{noticeas required underRules 8(1) and Rule 8(7) of the} Rules, 2002.^{No separateRule 8(6) notice providing 30 days prior to} e-auction sale^{notice enablingto redeem the property was issued as} held by the

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. The order in^Crl.MP was obtained by^{producing false affidavit'Merewitnessingphysical} possession does not forfeit^{the right of the applicantto challenge the} illegal actions.^{The valuation repoft was not obtained by the} authorizedofficeranditdoesnotdisclosethepicturesoftheproperty, prevailing government valuation^{etc', hence not valid' In spite of} knowing correct^{address of applicant at the time of preparing} Panchanama e-auction^{sale notice was not sent under Rule 9(1)' It is} furthercontendedthat,thoughtheauthorizedofficerclearlyinformed in the confirmation^{letter dated 08,02,2023 to pay balancebid} amount on or before^{20.02.2023 and pendency of SA' the 3'd} respondent failed^{to pay balancebid amount within time stipulated} under Rule 9(4).^{Rule 9(4) does not confer any discretioneither to the} 1't respondent or the^{3'd respondent and it is rather mandatoryRule'} TheWhatsappmessagestatedtobesenttothe3'drespondentis dated2g.05.2023whichwasmorethanthreemonthsafterdateof confirmation of sale.^{Further,this Tribunalorder passedinterimorder} only 'not to register^{the sale certificate'hence no reasons can be} attributed for^{non-paymentof balance bid amount.Therefore,the} amount^paid by the 3'd^{respondent is liable to be forfeited under Rule} 9(5) and after appropriation,^{the residueif any, shallbe paid to the} person entitled to as per^provision under^{Sec.13(7)of the Act'} Accordingly, the 3'd respondent^{will be entitledto residueof forfeited} amount after appropriation.^{Seeking refund is a fresh cause of action} /VW^'* / l,/ '>

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SA No.50/2023

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which cannot be pleaded in this SA. The SA may be allowed in the interest of j ustice.

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During the course of arguments, learned counsel for the 1st respondent reiterated his version as in the reply statement. He relied on the documents filed on 03.04.2023 as proof of compliance of due procedure contemplated under the provisions of the Act and Rules framed thereunder and sought for dismissal of the SA.

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Learned counsel for the 3.d respondent also reiterated the version as in the reply and said that Rule 9(3) permits the successful bidder to deposit 25o/o of bid amount on the same day of auction or not later than next working day. since the bank working hours were over on 06.02.2023, the 3rd respondent deposited 25o/o bid amount on next day i.e.,07.02.2023 and hence there is no violation of Rule 9(3). He stressed on the fact that the 1st respondent vide letter dated 20.L2.2023 refused to receive the balance bid amount and it does not amount to violation of Rule 9(4). The applicant is only trying to usurp the money of 3.d respondent who is a retired employee. With these submissions, learned counsel prays to cancel the auction held on 06.02.2023 and order refund of 25o/o of bid amount to the 3rd respondent along with interest.

¶49

Now, the points that arise for consideration are;-

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(i) Whether the applicant has made out any valid ground to quash the measures of the 7st respondent including e- auction sale held on 06.02.2023 in respect of the SA schedule propefty under the SARFAESI Act, 2002 as prayed for?

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(ii) Whether the 3d respondent is entitled to refu nd of 25o/o bid amount with interest? /flftr"a, ^ A'<*t"

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(iii) To wnat renen To wnat renen wnat renen renen

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(iii) To wnat renen To wnat renen wnat renen renen

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SA No.50/2023

Point No.(i):

It is the contention^{of the applicant is that no securityinterest} has been created^{in favour of 1st respondentand except offer letterno} loan documents have^{been produced by the 1st respondent to} substantiate its claim.^{The same applicant in para 5.2 of application} averments stated^{as follows:}

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"5.2 It is submitted^{that the in the said loan processboth the} Applicant and the^{Respondentno'2 are co-borrowers' For the said} loan facility, availed^{from the Respondent No'1' the Applicant} herein has been^{payingthe EMI'sfrom the start till date as the} same was^{purchasedfor the future of his minor daughter and in} fact the said^{ScheduteProPertYwas mortgaged to the} ResPondent No.1 as^{securitY for the said loan faciliw} availed. .... ..."

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It is also^{statedin para 5.3 of applicationthat he could not pay} SomeoftheEMlsduetofamilydisputewithhiswifeandthathehad to leave the schedule^{property and live separately since31'07'2017'} Such is the admission;^{the applicantcannot be permittedthat the 1st} respondent is not^{entitledto enforce the security interest.Admittedly} the property is in^{the name of his wife i'e', 2nd respondentwho} remained ex^parte to the^{present proceedingsdespitenotice'Being} the main borrower and^{owner/mortgagorof the schedule property,} she has not^preferred to^{raise any objectionto the measures initiated} by the 1st respondent^{against the securedasset.}

¶60

The applicant stood^{as witness and signed in tne Panchanama} prepared by the advocate commissioner appointed^{by the learned} Chief Metropolitan Magistrate,^{Medchal-MalkajgiriDistrict in Crl' MP} No.80/2022 at the time of taking^{physicalpossessionon 07.tl.2022} i.e., even^prior to filing of the SA^{and in view of his explicit action, the} applicant cannot be^permitted to^{question the Sec.14 proceedingsand}

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SA No.s0/2023

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aver that^{physical possession} has been taken without following due Procedure.

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As regards the contention that the valuation report is defective, a perusal of valuation report dated 16.11.2022 filed by the 1st respondent does not suggest so. The reserve price was fixed at realizable value of the asset.

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The applicant has not produced any document as proof of furnishing his current address details after he started living separately from the yeat ?0L7 or at least after he was handed over possession notice dated 26.04.2022. Failing to do so, the appllcant cannot aver he has not been served with statutory notices at his present address. Since his is not residing in the mortgaged property, as admitted, he cannot aver that notices were not affxed on the schedule property.

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As far as contentions on non-compliance of Rules 9(3) and 9(4) of the Rules, 2002 and forfeiture of 25o/o bid amount deposited by the 3d respondent, it is a matter of record that vide order dated 76.02.2023 this Tribunal directed the 1st respondent not to register the sale certiflcate subject to deposit of 50o/o of outstanding amount due in three instalments. Applicant complied the conditional order. The auction was successfully conducted on 06.02.2023 and 3.d respondent stood as the highest bidder. As per details furnished in letter dated 07.02.2023, the 3rd respondent^paid 25olo of bid amount within time stipulated under Rule 9(3). It appears, even as on date 75o/o of 6id amount has not been^paid for reasons whatsoever. The 1st respondent vide confirmation letter dated 08.02.2023 instructed the 3'd respondent to^pay balance 75o/o bid amount on or^before 20.02.2023 and also informed about^pendency of the SA. The^3rd respondent filed a copy of letter dated 20.02.2023 whereby^the /n\l!trt/ . c Ut**''

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SA No.s0l2023

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authorized officer extended time till^{06.05.2023 i.e} ,^uptothree months from date of^{conflrmation of sale or till the date of outcome of} the SA whichever is^{earlier. The relevant portionof the letter dated} 20.02.2023 reads as^{hereu nder:}

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"In view of^{the same, the time duration for payment of 75o/o} balance amount^due to^{be paid by you is being extendedto} hetee months i.e. ti^{06.05.2023 or tilt the date of outcome} of the SA, whichever^{is earlier.}

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Again on 29.O5.2023,^{one Ms.sanjana lain of LICHFL (1't} respondent) sent a^{message to the 3'd respondent categorically} stating that "'ince there^{is an ongoingDRT case, we will not be} accepting any^{paymenE titl the case is disposedoff"'It is not} under dispute whether^{Ms.Sanjana Jain is the officer of 1st respondent} or not. Without any authority,^{the 1st respondent extendedthe time} beyond the^{period stipulated under Rule 9(4) and hence the auction} held on 06.02.2023 has become^ineffective.

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Point No,(ii):

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As far as contention on forfeiture of 25o/o bid amount^deposited by the 3'd respondent is concerned, as stated suprat the^lst respondent extended on its own the^prescribed time limit to^pay balance sale consideration citing^pendency of SA as reason.^{As such, I} do not deem it^just and proper to^punish the 3d respondent, who is a retired employee, by forfeiting the amount deposited by him towards 25o/o of bid amount. The argument of applicant that 3'd respondent is entitled to only residual part of forfeited amount after appropriation under Sec,13(7) of the Act, 2002 does deserve consideration since the deposit is not being forfeited.

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SA No.50/2023

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In the light of the above observations, it is to be concluded that the auction sale in respect of SA schedule property held on 06.02,2023 is liable to be set aside and consequently the parual bid amount of Rs.9,06,250/- is refundable to the 3.d respondent with interest @6010 p.a. simple since the 1st respondent has been possessing the amount with it from the respective dates of deposit.

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Point No.(iii):

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In the result, the Securitization Application is paruy allowed by setting aside the e-auction sale held on 06.02.2023 pursuant to e- auction sale notice dated 03.01.2023 in respect of the SA schedule property;

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However, this order does not preclude the 1st respondent from issuing auction sale notice in respect of SA schedule property afresh, strictly in accordance with law;

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The 1st iespondent is directed to refund the partial bid amount of Rs.9,06,250/- deposited by the 3'a respondent together with interest @670 p.a. simple from the date such deposits till date of payment;

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Consequently, the Interlocutory Applications pending if any, shall also stand closed. No order as to costs. Communicate a copy of this order to the^parties concerned and upload in the official website.

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(Typed to my dictotion by the P5, corrected, signed ond prcnounced by me in the open court on this the 273tdoy ol Jonuory,2025).

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MESHWAR KOTHE) PRESIDING OFFICER

Dokka Venkata Satya Sivaram v. LIC Housing Finance Limited

Case brief

What is this about?

What did the court decide?

Dokka Venkata Satya Sivaram v. LIC Housing Finance 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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