Partly allowed

M Sindhuja v. Punjab National Bank

DRT26 Mar 2025SA/566/2023

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal examined a SARFAESI application challenging the sale notice issued by the Bank. Finding procedural lapses in notice issuance and lack of valuation report, the Tribunal granted a stay and directed the Bank to exclude advertising expenses from the loan account due to the failed sale.

What did the court decide?

Application disposed of with direction to exclude expenditure incurred in issuance of impugned Sale Notice from loan account and liberty to initiate fresh action as per Act & Rules.

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

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SA No.566/2023

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Fair Order

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IN THE DEBTS RECOVERY TRIBUNAL AT MADURAI

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DATED THIS 26^th DAY OF MARCH, 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. 566/2023

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M. Sindhuja,

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Proprietrix, M/s. Sree Lakshmi Papers, No. 133, PSR Road, Sivakasi – 626 123. ---Applicant -Vs-

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The Authorised Officer, Punjab National Bank, SASTRA Centre, Circle Office Trichy, PNB House, Trichy – Tanjore Road, Kailasapuram, Trichy – 620 014.

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Punjab National Bank, Rep. by its Branch Manager,

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Sivakasi Branch,

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No. 81B, Kamarajar Salai,

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Railway Feeder Road, Sivakasi – 626 123. --- 1^st & 2^nd Defendants Bank

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Appearance of Advocates:

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Mr. M. Arunachalam ---- Counsel for the Applicant Mr. C. Deepak ---- Counsel for the 1^st & 2^nd Defendants Bank

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This SARFAESI Application was heard in the presence of Counsels for the Applicant and the 1^st & 2^nd Defendants 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:

Page 1 of 11

SA No.566/2023

O R D E R

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 SARFAESI Act, 2002 ending up with impugned Sale Notice dated 22.09.2023 against the Applicant and the schedule of property on the file of the Defendants and quash the same.

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

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The Applicant submitted that the Applicant is the Proprietrix of M/s. Shree Lakshmi Papers have indulged in paper board business. In order to develop business, they have approached the 2^nd Defendant Bank and got sanctioned six credit facilities on various heads, as on 01.08.2022. The Schedule mentioned property along with other properties was given as Secured asset. Initially, the firm was prompt in repaying the loan amount to the 2^nd Defendant Bank and the Applicant has so far repaid nearly Rs. 51.00 Lakhs upto 1^st March 2023 and had closed five credit facilities out of six, for which the Defendant Bank had already issued separate Demand Notices and Possession Notices. Thereafter, the Defendant Bank had issued Sale Notice dated 24.05.2023 by fixing the date of sale on 28.06.2023 for two items of properties. However, due to the want of bidders, Sale did not materialized. It is further stated that thereafter, the Applicant voluntarily identified one purchaser and with the consent of the Bank sold the properties and remitted the amount of Rs. 51.00 Lakhs in order to discharge the liabilities of above said five loan accounts. Apart from that at the insistence of the Defendant Bank in order to release of another property the Applicant herein has paid Rs. 5.00 Lakhs on 11.04.2023.

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It is further submitted that due to the spread of Covid-19, Pandemic and its worst impact the Applicant firm's business came to a standstill and the cash generation was very low and hence the regular periodical repayment could not be made by the Applicant. It is further submitted that day to day activities of the business was monitored by the Applicant's aged father and he was also suffered a temporary memory loss so that he was not able to closely follow the loan accounts. At that juncture, the Defendant Bank invoked SARFAESI Proceedings against the four items of security interest. The 2^nd Defendant issued Demand Notices U/s. 13(2) on 08.08.2022 & 16.08.2022 and subsequent Possession Notices on 09.11.2022 & 01.02.2023. But the Applicant borrower and the guarantors were not served with these statutory notices.

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Page 2 of 11

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SA No.566/2023

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It is further submitted that the Applicant has challenged the earlier two Sale Notices before the Hon'ble High Court of Madras (Madurai Bench) in W.P.(MD) No. 15431 of 2023 and in W.P.(MD) No. 21111 of 2023 and obtained a conditional stay order for an amount of Rs. 64,41,000/-. But unfortunately, the Applicant could not be able to arrange funds and failed to comply the conditional Order as directed by the Hon'ble Court.

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It is further submitted that the Defendant Bank issued 2^nd Sale Notice dated 02.08.2023 by fixing the date of E-Auction on 30.08.2023. The Applicant has challenged the above Sale Notice before the Hon'ble High Court of Madras (Madurai Bench) in W.P.(MD) No. 21111 of 2023 on various grounds. The above Writ Petition came up for admission on 29.08.2023, the Hon'ble Court was not inclined to entertain the Writ Petition since the Applicant had failed to deposit the amount as directed by the Hon'ble Court in the earlier Writ Petition. Further, once again the second sale was not materialized for want of bidders.

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It is further submitted that the Defendant Bank also filed a suit for recovery for a sum of Rs. 65,40,838.15p being in OA No. 527 of 2023 and the same is pending for adjudication. Further, without considering the huge amount paid by the Applicant, the 1^st Defendant just to harass the Applicant has issued a Sale Notice dated 22.09.2023 fixing the E-Auction Sale on 25.10.2023. The Defendant Bank has brought one item of property i.e. schedule property for sale and has indulged in excessive execution. Further it is submitted that the reserve price fixed is huge and whereas the alleged outstanding is meager.

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Main Grounds :-

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The Impugned Sale Notice dated 22.09.2023 and the entire measures initiated under the SARFAESI Act by the 1^st Defendant are arbitrary and illegal.

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

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The 2^nd Defendant Bank failed to establish the date of possession. The date of the Possession Notice pertaining to this account is 09.11.2022 but the Defendant Bank claimed that they have issued Possession Notice on 01.02.2023.

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SA No.566/2023

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The Defendants failed to publish the Possession Notice in two leading Newspapers, failed to affix it on the property and failed to serve the same to all the parties concerned and failed to serve the Possession Notice through electronic modes to all the parties concerned.

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The 1^st Defendant failed to serve 30 days of Sale Notice to the Applicant and all the parties concerned. Further, the 1^st Defendant failed to affix the Sale Notice on the property and failed to publish the same in two leading newspapers and failed to update the Sale Notice in the Bank's official website.

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The classification of the accounts of the Applicant as NPA is against the norms and guidelines of RBI. The classification of NPA is due to charging excessive rate of interest than the sanctioned interest rate to the loan account and there is no irregularity on the part of the Applicant.

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The Defendants have undervalued the properties and brought the same for sale against the principles of natural justice. The 1^st Defendant failed to obtain fresh valuation and failed to fix best reserve price in order to fetch higher price.

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The Defendants have not furnished the complete Statement of Accounts as the details of certain credits to the account are not reflected.

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The Defendants have failed to register the alleged transaction registered with the Central Registry as per section 20 of the SARFAESI Act.

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Description of the Immovable Property

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(As mentioned in the Sale Notice)

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Item No. 1

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Property in the name of Mrs. Vijayalakshmi

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Survey No. (i) 849/1A Extent Areas:

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The house site plot nos. 3 & 4 extending to East West 70 feet on the North 70 feet on the South, South North 35 feet on the West 35 feet on the East, totally 2450 Sq. ft = 272 Sq.yard.

Location:

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SA No.566/2023

Natesan Nagar in Thiruthangal Village, S. N. Puram Panchayat, Sivakasi Panchayat Union, Thiruthangal Sub Registration District and Virudhunagar Registration District.

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Boundaries

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North : V.T. Manoharan's Plot South : 16 feet width east west Rajiv Gandhi Road West : 28 feet width South North Chellappan Road East : Plot No. 2

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Survey No. (ii) 849/1A Extent Areas:

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The house site extending to East West 61.5 feet on the North 64.5 feet on the South, South North 38.5 feet on the West 32.5 feet on the East, totally 2236.5 Sq. ft totally 2236.5 Sq. ft.

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Total Extent 4686.5 Sq.ft

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Location:

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"Natesan Nagar" in Thiruthangal Village, S.N. Puram Panchayat, Sivakasi Panchayat Union, Thiruthangal Sub-Registration District and Virudhunagar Registration District.

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Boundaries

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South : Plot Nos. 3 & 4 ie., 1^st item North : Land sold by Karthikeyan East : 12 feet width south north common pathway West : 28 feet width South North common pathway

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

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INDEX TO LIST OF DOCUMENTS/ANNEXURE

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S.No.	Date	Documents/Annexure
1	08.08.2022	Demand Notice U/s. 13(2)of the SARFAESI Act
2	09.11.2022	Possession Notice U/s. 13(4)of the SARFAESI Act
3	01.03.2023	Loan closure Letter

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Page 5 of 11

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SA No.566/2023

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4	08.03.2023	Letter addressed to the bank seeking three months time with Statement of Accounts
5	11.04.2023	Payment Receipt
6	27.06.2023	Order of the Hon'ble Madurai Bench of Madras High Court in W.P.(MD)No. 15431 of 2023
7	29.08.2023	Order of the Hon'ble Madurai Bench of Madras High Court in W.P.(MD)No. 21111 of 2023
8	22.09.2023	Impugned Sale Notice

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3 . On the other hand, the Counsel for the 1^st & 2^nd Defendants Bank appeared before this Tribunal and filed Vakalat, Reply Statement & Typed set of Papers in which they denied the allegations and averment made by the Applicant and submitted that this Application itself is not maintainable in law and on facts and it is to be dismissed inlimine. It is further submitted that the present SA was filed by the Applicant challenging the Sale Notice dated 22.09.23 issued by the Defendant Bank, fixing the sale on 25.10.23. However, sale was not held due to want of bidders and, hence the SARFAESI Application becomes infructuous.

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Further it is submitted that the Applicant has not complied with the Conditional Order passed by the Hon'ble High Court. Thereafter, this Hon'ble Tribunal has granted a conditional stay order for a sum of Rs.20,16,000/-, which was complied with by the Applicant. The Applicant has served the interest neither for the Cash Credit Loan nor for the other Covid Term Loan. The Applicant was completely aware of the contents and affixed her signature on the loan papers and accepted it in order to get the loan and the Applicant is throwing unnecessary allegations against the Defendant Bank which is inappropriate.

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It is further submitted that the Defendant Bank has followed the SARFAESI Act scrupulously. The Bank has issued the Demand Notice on 08.08.22 and the same was served to others and for the Applicant, it is returned as "Unclaimed", the Bank has published the Demand Notice in both Tamil and English dailies on 04.11.2022. The Applicant has not replied to the Demand Notice and the same is deemed to be accepted by the Applicant. Further, the Possession Notice was issued on 01.02.23 and published the same in both English and Tamil dailies and the same was also affixed in the conspicuous part of the property. Further, the Bank has duly served the Sale Notice dated 22.09.23 to the Applicant and others and the Sale Notice was published in both English and Tamil dailies on 26.09.23 and the same was also affixed in the conspicuous part of the property. Further, the Defendant Bank has taken valuation before issuing the Sale Notice.

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SA No.566/2023

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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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Typed set of Papers filed by the 1^st & 2^nd Defendants Bank

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S.No.	Date	Particulars
1	08.08.2022	Demand Notice with AD cards
2	04.11.2022	Paper Publication of Demand Notice
3	01.02.2023	Possession Notice with AD cards
4	02.02.2023	Paper Publication of Possession Notice
5	22.09.2023	Sale Notice with AD cards
6	26.09.2023	Paper Publication of Sale Notice

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

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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 her property. In this case, the Applicant contended that initially the Applicant has repaid the monthly installments regularly however, due to heavy financial problems 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 and issued Demand Notice on 08.08.2022. The Defendant Bank has also stated in their Reply Statement 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 08.08.2022 U/s. 13(2) of SARFAESI Act for a sum of Rs. 67,83,454.69p (Rupees Sixty Seven Lakhs Eighty Three Thousand Four Hundred Fifty Four and paise sixty nine only). I also perused the documents filed by both the parties and 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. 9 to 11 as an evidence for having sent

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Page 7 of 11

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SA No.566/2023

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the copy of Demand Notice to the Guarantor/Mortgagor but the postal cover sent to the borrower/Applicant is returned/undelivered with postal remarks 'unclaimed'. The Bank has also filed the copies of Paper Publication made in Tamil & English Newspapers (page nos. 12 & 13 of Bank's typeset). But, the copies provided are not clear enough to verify the genuineness of the documents. I also find that 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 01.02.2023. The Applicant in her averment stated that the Bank has failed to establish the date of possession. The date of Possession Notice pertaining to this account is 09.11.2022, but the Defendant Bank claimed that they have issued Possession Notice on 01.02.23. But, the Defendant Banks in their Reply Statement have not given any proper reply to this issue. However, the bank has filed a copy of Possession Notice dated 01.02.2023 and copies of AD Cards for having sent the copies of Possession Notice to the Guarantor/Mortgagor at page nos. 14 to 20 of typed set of papers. But, there is no evidence for having sent the Possession Notice to the Applicant. Further, the Bank has submitted the copies of Paper Publication of Possession Notice made in Tamil & English Newspapers at page nos. 21 & 22 of typed set of papers. But, the copies provided are not clear enough to verify the genuineness of the documents. Moreover, the Bank has not filed any evidence for having affixed the Possession Notice on the conspicuous part of the property. Thus, I do not find that the Defendant Bank has strictly followed the SARFAESI procedures, while issuing Possession Notice to the Applicant. 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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Page 8 of 11

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SA No.566/2023

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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 has issued the impugned Sale Notice dated 22.09.23, which was scheduled to be held on 25.10.2023. Being aggrieved over the same, the Applicant has filed this present SA. I perused the documents filed by the Defendant Bank and I find that the Defendant Bank has filed the copy of Sale Notice dated 22.09.23 (page nos. 23-28 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 and also failed to update the Sale Notice in the bank's official website. I perused the documents and I find that the Bank has produced two AD Cards (page nos. 29 to 36 of Bank's Additional typed set). 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. 37 & 38 of Bank's typed set). But, the copies provided are not clear enough to verify the genuineness of the documents. Moreover, the Bank has not filed any evidence for having affixed the Sale Notice on the conspicuous part of the property. 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):

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[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

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SA No.566/2023

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

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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

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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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During the pendency of the case, this Tribunal has granted a conditional stay order for a sum of Rs. 20,16,000/- to the Applicant which was also complied by the Applicant. However, during the adjudication the Counsel for the Defendant Bank has informed this Court that Sale was not happened for want of bidders in respect of the impugned Sale Notice dated 22.09.23 and to this effect the bank has filed a Memo in SR No. 112/24 and requested this Court to dismiss the SA as infructuous as the Sale did not happen. Hence, this case was heard on merit.

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SA No.566/2023

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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 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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6 . However, in this case sale was not held for want of bidders. Hence, this case is disposed of with direction to the 1^st & 2^nd Defendant Banks not to include all the expenditures incurred in issuance of Impugned Sale Notice dated 22.09.2023 in the loan account of the Applicant.

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The 1^st & 2^nd Defendant Banks are 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 26^th March, 2025.

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sd/- (SEEMA SINHA) PRESIDING OFFICER

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Dictated & Corrected by me

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sd/-

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(SEEMA SINHA)

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PRESIDING OFFICER