Dismissed

Ms Bharath Logistics v. Punjab National Bank

DRT30 Jan 2025SA/687/2023

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal dismissed a Safaesi application challenging a Section 14 order for possession. The court held that the bank followed due procedure, the applicant received notices, and the Section 14 order was lawful and not open to review under Section 14(3).

What did the court decide?

The SA No. 687/2023 was dismissed; any interim order granted was vacated; pending incidental applications were disposed off.

Ms Bharath Logistics versus Punjab National Bank — Company and Corporate | DRT (2025)

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SA No.687/2023 (C)

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30.01.2025

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IN THE DEBTS RECOVERY TRIBUNAL-III, CHENNAI

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Dated this the 30^th day of January, 2025

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Present: SMT. S.V. GOWRAMMA Presiding Officer

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SARFAESI APPLICATION No. 687 of 2023

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M/s. Sri Bharath Logistics, Rep by its Prop, Mr. B. Jayakumar No. 128/51, Vekatathri Street, Kosapet, Purasalwakkam Chennai – 600 007. 2. Mr. B. Jayakumar, (Propreitor & Mortgagor) S/o. Mr. R. Balakrishnan, No. 128, Old No. 59, Venkatathri Street, Kosapet, Purasalwakkam, Chennai – 600 012. …Applicants

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-Vs-

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Punjab National Bank, Rep, by its Chief Manager & Authorized Officer, Mr. Muniswamy Velayudham, Circle Sasthra Centre-Chennai No. 769, Spencer Plaza, 2^nd floor, Anna Salai, Chennai – 600 002. ... Respondent

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Counsels on record / appeared:

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Counsel for Applicant : Ld. Counsel Mr. Chandra Mohan Counsel for respondent : Ld. Counsel Mr. Rahul Jain

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: - ORDER ON SA.No. 687/2023 - :

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The applicants are the borrowers has filed the present SA, impugning the Order dated 20.10.2023 passed by the Ld. CMM, Egmore in Cr.MP.No. 16571/2021. The total outstanding due is Rs. 89,39,175.03 as on 10.07. 21 as per S.14 order

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SA No.687/2023 (C)

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30.01.2025

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The case as put forth by the applicant is that the applicant availed MSME Loan of cash credit for a sum of Rs. 75,00,000/-(Rupees Seventy-Five Lakhs only) to the proprietary concern for handling raw materials from Mahboob Nagar to various purchasers in Chennai. The applicant had mortgaged the residential property and also executed MOTD which is registered as document No. 3046 of 2017, registered in the office of the Sub-Registrar, Purasalwakkam.

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The business of the applicant was making good profit for more than 10 years however, suffered loss from 2019 onwards and subsequently, due to COVID-19 Pandemic from March 2020 onwards the business was under loss. Hence, applicant could not make any repayments which has resulted in the classification of the account as NPA on 06.06.2019. The bank stating untenable allegations and have threatened to classify the account into wilful defaulter and issued a show cause notice dated 13.03.2020.

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The bank has issued alleged demand notice dated 04.01.2019 and took symbolic possession of the property on 04.09.2019 and classified the account as NPA on 16.06.2019 without issuing the demand notice.

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Thereafter, the bank has issued Omnibus Sale notice dated 05.01.2023 without serving the sale notice and have conducted e-auction on 27.01.2023. The property sold to Kalpana Devi & Devanand and a sale certificate is registered as Document No. 7067 of 2023 dated 01.11.2023 without proper valuation of the property which is worth more than one Crore is sold for Rs. 89,30,000/-.

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It is further contended by the applicant that the bank has issued the first sale notice dated 29.10.2019 and second sale notice dated 09.07.2021 and have not

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SA No.687/2023 (C)

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30.01.2025

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affixed the sale notice on the conspicuous part of the property. It is alleged that right from classification of the account as NPA the bank has committed gross infirmity and even without serving the demand notice have sold the property in the notice dated 05.01.2023. The Authorized Officer of the bank have committed infirmity in not stating the aggregate amount before the Ld. Chief Metropolitan Magistrate Court in Crl.M.P.No. 16571 of 2021.

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In the grounds, it is alleged that the impugned order dated 20.10.2023 is violative of Section 14 of the Act. The Authorized Officer of the Bank has failed to mention total claim of the bank as on the date of filing the application before the Court.

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The bank issued the letter dated 23.09.2019 has stated the account was classified as NPA on 16.06.2019 but the possession notice dated 04.09.2019 claims that the demand notice is issued on 04.01.2019 where the account was classified the account as NPA on 16.06.2019 after the issuance of the demand notice which is violation of the Section 2(o) of the Sarfaesi Act and RBI guidelines.

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The bank has not followed the Rule 8 (1) of the Security Interest Rules, not effected paper publication in the two leading newspapers and have not affixed the first sale notice on the property.

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The bank has not published the e-auction sale notice dated 09.07.2021 in the newspapers and it does not carry proper description of the immovable property as seen from the possession notice dated 04.09.2019 and the e-auction sale notices dated 29.10.2019; 09.07.2021 & 05.01.2023 are in violation of Rule 8 6 (a) of the S.I.E Rules 2002.

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SA No.687/2023 (C)

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30.01.2025

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The actions and measures of the Authorized Officer is bad in law and in view of the non-classification of the account as NPA, the order is to be set aside.

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Respondent bank has filed the counter affidavit contending that the present SA is filed challenging the S.14 order dated 20.10.2023 in Crl.MP.No. 16571 of 2021 passed by the Ld. CMM, Egmore. It is submitted that the applicant did not challenge any measures taken by the respondent as per the provisions of the SARFAESI Act, nor has replied nor questioned the demand notice under Section 13(2) of the Act and had not challenged the 13(4) possession notice issued by the respondent bank.

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The bank has issued sale certificate dated 01.02.2023 favouring the auction purchaser which is not challenged.

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It is the case of the respondent bank that the Applicant had availed Cash credit loan facility of Rs. 75 Lakhs, in the year 2017 and had failed to service the principal and interest in compliance of the terms and conditions of the sanction letter and the account had slipped to NPA on 31.12.2018.

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Due to non regularization of the cash credit account, the bank has initiated SARFAESI proceedings by issuing demand notice dated 04.01.2019 under Section

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13(2) of the Act for recovery of the outstanding of Rs. 76,51,620.10/- as on 31.12.2018 payable to the respondent bank.

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Further, the bank has issued the possession notice under Section 13(4) of the Act, thereafter following the Rule 8(1) and (2) of the SARFAESI Rules, had affixed

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the possession notice at the outer door of the property on 04.09.2019. Further, the possession notice was also published in two leading newspapers i.e. on English

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SA No.687/2023 (C)

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30.01.2025

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newspaper, namely Deccan Chronicle and one local Tamil Newspaper, namely Dinakaran on 10.09.2019.

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The bank had filed S.14 application in Crl.M.P.No. 16571 of 2021 for taking the physical possession of the property and on due consideration of the facts, the Ld. Magistrate had allowed the petition Vide order dated 21.12.2021 and appointed an Advocate Commissioner to take physical possession of the property.

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The bank had also obtained valuation report in respect to the scheduled property from bank’s approved valuer for fixing the reserve price prior putting the schedule property for e-auction sale. The bank had conducted the auction, pursuant to the sale notice dated 05.01.2023 which was sold on 27.01.2023 to Mrs. Kalpana Devi, who is the successful bidder has paid 25% EMD of Rs.22,32,500/- and thereafter paid the balance sum of Rs. 66,97,500/- within the stipulated time and have also paid the entire sale consideration of Rs. 89,30,000/-. Hence, applicant bank had issued the sale certificate dated 01.02.2023 which is also registered in Favor of the auction purchaser.

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The Respondent bank denies the allegations made in the SA paper book and submits that the applicant – borrower failed to regularize the loan account, resulting in the classification of the account as NPA on 31.12.2018.

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The Respondent had issued demand notice dated 04.01.2019 under Section 13(2) of the SARFAESI Act followed by the possession notice dated 04.09.2019 under Section 13(4) of the act and have taken symbolic possession of the property. The respondent had affixed the possession notice at the outer door of the property as per the Rule 8(1) and 8(2) on 04.09.2019. Furthermore, the possession Notice was

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SA No.687/2023 (C)

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30.01.2025

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also published in two leading Newspapers i.e. Deccan Chronicle and Dinakaran on 10.09.2019.

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The applicant had approached the bank for One Time Settlement for a sum of Rs. 70.00 Lakhs for closure of the said loan account and deposited a sum of Rs 6.74 Lakhs as upfront payment, to which the bank had informed the applicant to improve the OTS offer. Despite, sufficient opportunities the applicant failed to improve the OTS offer and the payments made by the applicant was adjusted to the said loan account.

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It is also an admitted fact that the bank had earlier issued auctions notices dated 05.12.2019, 30.12.2019; 12.08.2021,27.10.2022 and 30.12.2022. However, no bidder participated for schedule sale of the property. Thereafter, bank was constrained to issue Sale Notice dated 05.01.2023 which is affixed at the conspicuous place of the property. The bank had published Sale Notice in two leading newspapers i.e. one English Newspaper, namely The New Indian Express and one local Tamil Newspaper, namely Dinamani on 06.01.2023 as per Rule 8(6) of the SARFAESI Rules.

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The bank had detected the second applicant was diverting funds to other businesses owned by him and a sum of Rs. 75.00 Lakhs was transferred to M/s. Bharath Industries during the period from 18.07.2017 to 05.01.2018. Thereafter, the bank had classified the applicant as “Wilful Defaulter”.

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After, appropriating the sale proceeds to the loan account , the applicant is still due and liable to pay a sum of Rs. 12,89,226/- as on 29.02.2024. The bank had

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SA No.687/2023 (C)

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30.01.2025

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followed all the procedures and the applicant has filed the present SA only to frustrate the proceedings.

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Heard the submissions of the Ld. Counsels appearing for respective and perused the records of the case.

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It is manifest from the records that the applicant has filed the present SA challenging the S.14 Order dated 20.10.2021 passed by the Hon’ble Chief Metropolitan Magistrate, Egmore, Chennai in Crl.Misc.No. 16571/2021.

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The records of the case reflects that applicant is the proprietor of M/s. Bharath Logistic has availed MSME loan of Rs. 75 Lakhs for its business in the year 2017, has mortgaged applicants property as collateral security towards the loan by way of deposit of title deed vide document No. 3046 in the office of Sub Registrar, Purasalwakkam in 2017. In fact availing of the loan, mortgage of the property as security towards the loan is admitted by the applicant in para V[1] of the SA pleadings.

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It is also an admitted fact that due to default in the repayment, the bank has classified the account as NPA on 31.12.2018. Subsequent to the classification of account as NPA, the bank issued section 13(2) demand notice dated 04.01.2019 demanding the outstanding amount due in the loan account.

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The S.13(2) demand notice issued by the respondent bank reflects the credit facility availed by M/s. Shri. Bharath Logistics and the outstanding amount due as on 31.12.2018. The Notice clearly describes the mortgage property and the bank has initiated SARFAESI proceedings by issuing demand notice dated 04.01.2019 under Section 13(2) of the Act for recovery of the outstanding of Rs. 76,51,620.10/- to be

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SA No.687/2023 (C)

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30.01.2025

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paid within 60 days. Further, the notice clearly draws the attention of the applicant to section 13(8) of the Act to redeem the secured asset and the restriction on the borrower under Section 13(3) of the act not to alienate the property. The contends of the demand notice is as per S.13[2] of the SARFAESI Act.

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As the borrower did not liquidate the liability within the period of 60 days as mandated under S. 13(2) of the Act, the bank has proceeded further and issued the S.13[4] notice dated 04.09.2019. The 13(4) Notice is duly acknowledged by the proprietor of the applicant M/s. Shri,B. Jayakumar, who has put his signature on the acknowledgment card as seen in the documents produced by the respondent bank at page No. 5 & 6 of documents to the objections. The respondent bank has also affixed the S.13(4) possession notice and the photographs evidencing the same is at document No.7 and the publication of the possession Notice in two leading newspapers, one in vernacular language and another in English newspaper is evidenced at the documents No.8 & 9 respectively.

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As the applicant did not liquidate the liability even after the receipt of S.13(2) & S.13(4) notices, the bank has proceeded further in filing Section 14 application to take the physical possession of the property and have also issued the sale notice dated 09.01.2021.

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In the instant matter, the applicant contends that account is wrongly classified as NPA and relies upon the 10 day’s notice dated 23.09.2019 issued by the bank, wherein it is seen reflected that, the date of the classification of the account as NPA on 16.06.2019 and the date of classification as mentioned in the S.13(2) demand

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SA No.687/2023 (C)

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30.01.2025

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notice is on 31.12.2018, hence contends that the classification of the account is after the issuance of the demand notice.

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On examination of the show cause notice dated 13.03.2020 it clearly shows that notice is issued for identification of the defaulter loan of the applicant as wilful defaulter and not a measure under SARFAESI Act.

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Further the contention of the applicant that the classification of NPA is on 06.06.2019 which is after the issuance of the demand notice dated 04.01.2019 would not sustain. On perusal of records, it is seen that the bank has mentioned the date of NPA on 31.12.2018 and the same date of NPA is reflected in the Section 13(2) demand notice dated 04.01.2019 and the 13(4) possession notice dated 04.09.2019. Hence it is to be concluded that the classification of the account as NPA is on 31.12.2018 and not on 16.06.2019 as contended. It is nothing but an in adverted mistake in mentioning the date of NPA as 16.06.2019.

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In fact, the applicant in the pleadings has wrongly mentioned the classification of the account as NPA is on 6.06.2019 at page No.2 & at page 3 it is wrongly mentioned the date of NPA as 16.06.2019. It is evidenced from the records that the classification of account as NPA is on 31.12.2018 and not as 16.06.2019 as contended by the applicant in the SA. Hence the contention that date of NPA is wrong cannot sustain.

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It is argued by the applicant that the S.13(2) demand notice is not delivered to the applicant. Per Contra, the bank have produced the receipt of the S.13(2) demand notice as document no.1 wherein, it is seen that the proprietor of the applicant Mr. B. Jayakumar, have received the S.13(2) personally and have put his

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SA No.687/2023 (C)

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30.01.2025

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signature on the S.13(2) demand notice which is denied by the applicant counsels that it is not the applicant signature.

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On perusal of the SA papers, the signature of the applicant in the SA pleadings and in vakalat nama, it is clear that Mr. B. Jayakumar signature are the same to the naked eyes and thus it is established that B.JayaKumar has received S.13(2) demand notice and there is no iota of doubt with regard to the signature not being different. Thus the service of the S.13(2) personally on the applicant is clearly evidenced by the respondent bank.

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As the applicant did not liquidate the liability within 60 days after the receipt of S.13[2] as mandated, nor raised any objections to the demand made, the Respondent bank has issued S13(4) possession notice dated 04.09.2019 which is received as evidenced from the acknowledgement card produced by the bank. The bank has affixed the possession notice dated 04.09.2019 and has also published the S.13(4) notice on the secured asset; published in the two leading newspapers as required under Rule 8 of the SARFAESI Act and have complied with all the procedures of the Act and Rule made thereunder the Act.

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Though the applicant has challenged the Section 14 Order dated 20.10.2021 highlighting that he has not received the S.13[2] demand notice dated 04.01.2019 and possession notice dated 04.09.2019, have failed to make out a case of non compliance of the procedures by the respondent bank as secured creditor.

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Further it is manifest from the records that the bank has issued four sale notices dated 05.12.2019, 30.12.2019, 12.08.2021, 27.10.2022 and 30.12.2022 and the fifth sale notice dated 05.01.2023 is also received by the applicant as per the

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SA No.687/2023 (C)

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30.01.2025

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Acknowledgment card produced by the bank at page No. 25. The Affixture and the publications of the sale notice dated 05.01.2023 is also established by the respondent bank on producing the same along with the counter.

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The present SA is filed challenging the Section 14 order dated 20.10.2021, and the applicant himself has produced the Advocate Commissioner warrant dated 20.10.2023 and the advocate’s Notice dated 08.11.2023 to vacate the premises n pursuant to the Section 14 Order.

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It is pertinent to mention that the applicant/any borrower or any person aggrieved by the measures taken by the bank has to approach the Tribunal under Section 17(1) within a period of 45 days, evidently the challenge to Section 13(4) possession notice is on 04.09.2019 is not within the period of 45 days, however, the bank has countered the allegations in respect of S.13(2) demand notice dated 04.01.2019 and S.13(4) possession notice dated 04.09.2019 and have produced the documents in support of the measures taken by the bank.

¶96

Though the applicant has challenged the Section 14 order dated 20.10.2021 passed by the Hon’ble Chief Metropolitan Magistrate, Egmore, Chennai, in Crl.M.P.No. 16571/2021, has not made out any case for interference of this Tribunal in the order passed by the Ld. Magistrate in Cr.M.P. No.16571 of 2021 dated 20.10.2023. The secured creditor has filed Section 14 application along with the affidavit complying with all the requirements as mentioned under Section 14 [i] to [ix] along with the documents.

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SA No.687/2023 (C)

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30.01.2025

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The Hon’ble Chief Metropolitan Magistrate after perusing the documents filed along with the affidavit has considered and passed an order after satisfying the due compliance of the measures initiated by the bank under the Act.

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In absence of any irregularity in Section 14 application, affidavit or in the Order the present fails. Furthermore, as per S.14[3] “No order passed by the Chief Metropolitan Magistrate or District Magistrate (any officer authorized by the Chief Metropolitan Magistrate or District Magistrate) done in pursuance of S.14 section shall be called in question in any court or before any authority”.

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On cumulative examination of facts, pleading and on perusal of records it is held that the respondent bank as secured creditor has initiated the measures under the SARFAESI Act after classification of the account as NPA as per RBI guidelines and issued S.13[2] demand notice dated 04.01.2019 and S.13[4] possession notice dated 04.09.2019 in due conformity with the procedures as described under the Act and Rules and have complied the procedures as mandated.

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As the applicant has filed to make out a case of any irregularity in the measures taken by the secured creditor under the Act , the present SA is only to be dismissed.

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Accordingly, SA.687/2023 stands dismissed. Interim order granted, if any, stands vacated. Pending I.As are disposed off. No order as to cost.

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(Dictated to stenographer (Saranya), transcribed by her, corrected, signed and pronounced by me on this the 30^th day of January, 2025)

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Sd/-

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

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SA No.687/2023 (C)

30.01.2025

APPENDIX

LIST OF DOCUMENTS PRODUCED BY THE APPELLANT

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SI.No	Date	Particulars		Annexure
1.	22.06.2017	Sanction letter		A1
2.	04.09.2019	Possession Notice		A2
3.	09.07.2019	E-AuctionSaleNotice		A3
4	23.09.2019	10 days’ Notice to the Promoter/Directors for recti	Borrower/ fication of	A4
		events of default issued respondent.	by the
5	13.03.2020	Show cause Notice to the Guarantor(S)/ Non-Group Guarantor(S)/ Group Guarantor(S)issued by theres	Borrower/ corporate Corporate pondent.	A5
6	31.12.2020	Order of the committee for id of wilful defaulters passed in p conducted at Syndicate Ro officer of the Respondent.	entification roceedings om, Head	A6
7	01.02.2022	Request letter for OTS from th applicants.	e	A7
8	14.02.2022	Request letter for OTS applicants.	from the	A8
9	21.02.2022	Request letter for OTS applicants.	from the	A9
10	25.02.2022	Request letter for OTS applicants.	from the	A10
11	20.10.2023	Advocate Commission Warran Crl.M.P.No. 16571 of 2021 Chief Metropolitan Magistrate Chennai.	t issued in by the Ld. , Egmore,	A11
12	08.11.2023	Notice issued by the Commissionerto the applicant	Advocate s.	A12
13	21.12.2021	Order passed by the Chief M Magistrate, Egmore, Chennai No. 16571of 2021.	etropolitan in Crl.M.P.	A13

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LIST OF DOCUMENTS PRODUCED BY THE RESPONDENT

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Sl.	DATE	Description of Documents	Annexure
No.
1.	04.01.2019	Demand Notice issued by the	R1
		Respondent to the Applicant
2.	04.09.2019	Possession Noticeissued by the	R2

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SA No.687/2023 (C)

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30.01.2025

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		Respondent to theApplicant
3.		Acknowledgement Card Receipts issued by thePostal Authority	R3
4.	04.09.2019	Affixture of the Possession Notice by theRespondent	R4
5.	10.09.2019	Publication of the Possession Notice by theRespondent	R5
6.	01.02.2022	OTS Letter given by the Applicant to theRespondent	R6
7.	24.06.2022	Valuation Report given by the Bank’sApprovedValuer	R7
8.	05.01.2023	Sale Notice issued by the Respondent to theApplicant	R8
9.		Acknowledgement Card Receipts issued by thePostal Authority	R9
10.	05.01.2023	Affixture of the Possession Notice by theRespondent	R10
11.	06.01.2023	Publication of the Sale Notice by the Respondent	R11

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Sd/-

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

Ms Bharath Logistics v. Punjab National Bank

Case brief

What is this about?

What did the court decide?

Ms Bharath Logistics v. Punjab National Bank

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

Coram

Case details

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