Dismissed

Kamalakkan v. Union Bank of India

DRT20 Aug 2025SA/79/2023

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal-II at Chennai dismissed an application challenging an order granting possession to a bank under Section 14 of the SARFAESI Act. The Court found no illegality, impropriety, or lack of compliance with procedural provisions, noting the bank had followed statutory mandates.

What did the court decide?

The application challenging the impugned order stands dismissed. Parties bear their own costs.

Kamalakkan versus Union Bank of India — Banking and Recovery | DRT (2025)

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IN THE DEBTS RECOVERY TRIBUNAL – II AT CHENNAI

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Dated this 20^th day of August, 2025

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PRESENT: SHRI SHARANG DHAR UPADHYAY Presiding Officer

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SA No.79 of 2023

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S. Kamalakannan

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Son of K. Seetharaman

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No.58/7, H block, Vedhamambujam Apartments, Anna Nagar (E)

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Chennai – 600 102

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K.S. Masethung Kathirvel Son of K. Seetharaman

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No.15, DABC Mithilam, Block-5

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Sriram Nagar Main Road Nolambur, Chennai – 600 037

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… Applicants

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Versus

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The Authorised Officer Union Bank of India Asset Recovery Branch, Broadway

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Chennai – 600 108

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Master V.V. VladmirIlich Arunan Represented by its Natural Guardian and Mother Mrs. I. Vetriselvi W/o A. Velmurugan No.3, 4^th Street, Ayyappan Nagar Avadi, Kamaraj Nagar, Thiruvallur – 600 071 … Defendants

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Counsel on Record / Appeared

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Applicant by : Ld. Counsel M/s J. Prince Defendant No.1 by : Ld. Counsel M/s K.S. Sundar & S. Bhooma Defendant No.2 : Ld. Counsel M/s A. Ramaswamy

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O R D E R

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This petition is filed under Section 17(1) of the SARFAESI Act challenging the

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measures initiated by the respondent bank order of Learned CMM, Egmore dated 15.12.2022 in Crl. M.P. No.34582 of 2022 passed under Section 14 of the Act.

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Facts of the case

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2.0 The applicants herein are the Directors of M/s Fine Leather Chem Pvt. Ltd., engaged in the business of leather and its products thereof. The said company had in the year 2015 availed credit facilities to the tune of Rs.250 lakhs from the 1^st defendant bank for its business and the applicants stood as guarantors for repayments of the said sum.

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2.1 Due to the loss in business the applicants could not maintain the repayment schedule and the default had occurred. The applicants immediately requested the bank for restructuring the loan account but the same was not considered by the defendant bank. The defendant bank proceeded to classify the loan account as NPA and issued the demand notice under Section 13(2) of the SARFAESI Act on 13.04.2018. Subsequent to the issuance of the demand notice the applicants have remitted a sum of Rs.150 lakhs, which amount has not been credited to the loan account. Thereafter, the Possession Notice dated 26.09.2018 came to be issued by the 1^st respondent.

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2.2 The applicants never allowed the loan account to become a NPA. Despite several remittances made by the applicants the loan account was classified as NPA on 30.09.2019. The loan account was regularized subsequently and hence the 1^st respondent cannot proceed further without issuing fresh demand notice under Section 13(2) of the SARFAESI Act.

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2.3 The applicants sent a letter on 14.09.2021 to defendant bank offering to settle the loan account under OTS for a sum of Rs.165 lakhs along with upfront free of Rs.16,50,000/-, which was belatedly rejected by the bank by its letter dated

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27.12.2021. The defendant bank also proceeded to issue the sale notice dated 11.2.2022.

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2.4 While the matter stood thus, the 1^st defendant bank issued sale notice dated 11.2.2022 fixing the sale on 17.3.2022. The applicants immediately submitted a revised offer of Rs.190 lakhs vide OTS letter dated 15.02.2022 with upfront amount of Rs.16.5 lakhs. The 1^st defendant bank invited the applicants for negotiations on 18.3.2022 and during negotiations the applicants were insisted to deposit Rs.55 lakhs. The applicants deposited Rs.25 lakhs on 21.03.2022 and requested time for remitting the balance Rs.25 lakhs. The Authorised Officer informed the applicants that the property has been sold for a sum of Rs.1,12,00,000/- and sale is yet to confirmed and refused to give the details of bidders. Aggrieved by the same the applicants filed SA No.143 of 2022 before DRT-I Chennai, wherein the Tribunal granted an interim order subject to payment of Rs.1 crore to the loan account, which amount was deposited by the applicants on 04.04.2022 and the interim stay is subsisting.

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2.4 While so, the applicants were shocked and surprise to receive the notice dated 10.2.2022 from 1^st defendant about the proceedings in Crl. M.P. 34582 of 2022. The defendants were asked to vacate the premises. The defendant bank suppressing various materials on record has obtained the impugned order from the Ld. CMM, Egmore.

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Grounds Urged

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3.0 (i) The 1^st defendant bank has failed to issue notices under Section 13(2) and 13(4) of the SARFAESI Act to all the borrowers.

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(ii) The 1^st defendant bank failed to comply with Rule 3A of the SIE Rules.

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(iii) In as much as the 1^st defendant bank did not issue the Section 13(2) notice to the applicants the same has impaired the statutory right of the applicants under Section 13(3A) of the Act.

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(iv) The Authorised Officer has failed to serve, affix and publish the possession notice as mandated under law.

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(v) The impugned order has been obtained by suppressing the pendency of SA No.143 of 2022 and operation of the interim stay.

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(vi) The amounts are not crystallized before issuance of Section 13(4) notice.

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Counter of 1^st Defendant

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4.0 Upon notice the 1^st defendant filed counter affidavit contending therein that it had granted Working Capital Loan of Rs.2.50 crores to M/s Fine Lethers Chem (P) Ltd., and the repayment of the said loan is secured by personal guarantee of Mr. G. Ravindran, Mr. V. Pandy, Mr. K.S. Masethung Kathirvel and Mr. S. Kamalakannan and also by the mortgages created by Mr. S. Kamalakannan and Mr. K.S. Masethug Kathirvel.

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4.1 Despite the fact that the defendant bank had filed OA No.404/2019 before DRT-I Chennai (now TA No.180 of 2023, DRT-II Chennai), no repayments were made by the borrowers and hence the defendant bank invoked the provisions of the SARFAESI Act.

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4.2 In view of the default committed by the borrowers the loan account was classified as NPA on 30.09.2017. As the applicants failed to repay the dues a second sale notice was issued on 11.02.2022 scheduling the sale to 17.3.2022 with a reserve price of Rs.1,11,00,000/-. The said sale notice was duly served on the applicants, affixed on the secured asset and published in newspapers on 12.02.2022. Mr. V.V. Vladimir Illich Arunan was declared as a successful bidder for Rs.1,12,00,000/- and the sale was confirmed in his favour. As the successful bidder had remitted the entire sale consideration the sale certificate was issued on 25.3.2022.

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4.5 The defendant bank issued the demand notice under Section 13(2) of the Act on 13.4.2018 and the same was received by the applicants on 16.04.2018. Inspite of the same the applicants did not raise any objection regarding the classification of the account as NPA. It is misleading to state that Rs.150 lakhs was paid and accordingly the loan account came out of NPA classification.

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4.6 The various contentions raised by the applicants regarding the non compliance of the provisions of the Act are all false, on the other hand the defendant bank has strictly complied with the provisions of the SARFAESI Act and the Rules made thereunder.

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4.7 The 1^st defendant bank filed following documents in support of its contention: -

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(i) Loan Account status report

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(ii) Proceedings in SA No.143 of 2022

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(iii) Objection memo along with documents filed by the applicants.

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(iv) Intimation letter dated 10.2.2023 sent by the respondent bank.

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(v) Order of the Ld. CMM, Egmore in Crl. M.P. No.34582 of 2022 dated 15.12.2022.

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Counter of 2^nd defendant

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5.0 The 2^nd defendant and her daughter Selvi V. Kanimozhi jointly participated in the e-auction conducted 17.03.2022 and were declared as successful bidders for a sum of Rs.1,12,00,000/- by the 1^st defendant bank. As the defendants 2 and 3 remitted entire sale consideration by 24.3.2022, the sale certificate was issued in their favour on 25.3.2022.

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5.1 These defendants are given to understand that the applicants have challenged the sale notice dated 11.2.2022 by filing SA No.143 of 2022 before DRT-I Chennai and the Tribunal had granted an interim order 31.3.2022 subject to condition of the applicants remitting a sum of Rs.1 crore with the respondent on or before 04.03.2022. These defendants are given to understand from the statement of accounts served on them in SA No.79 of 2023 that the said interim order is not complied with. It is stated that in view of the said interim order these defendants are unable to get the physical possession of the property. Thereafter these defendants took steps for impleading themselves in SA No.143 of 2022 and the same was allowed on 28.09.2022.

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5.2 The applicants have filed SA No.79 of 2023 before this Tribunal challenging the order of CMM, Egmore, Chennai in Crl. M.P. No.34582 of 2022 dated 15.12.2022. The contention of the applicants that the amount due in the loan accounts is only Rs.36,063/- as on 30.04.2022 is false and misleading one. The said due is only after appropriation of the sum of Rs.1,12,00,000/- remitted by the auction purchasers.

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5.3 These defendants have invested huge money and hence the principles of natural justice requires that the defendant bank be directed to hand over vacant possession of the schedule properties without any delay. These defendants pray that the SA be dismissed with costs.

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5.4 The 2^nd defendant filed following documents: -

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(i) Sale confirmation letter dated 18.3.2022.

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(ii) Sale certificate issued by the bank dated 25.3.2022

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(iii) Interim order of stay in SA No.143 of 2022 dated 31.3.2022

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(iv) Counter filed by the bank in SA No.143 of 2022.

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6.0 Heard the Ld. Counsel. The parties were granted time for filing written submissions and both the parties filed their common written submissions in TA No.236 of 2023 and SA No.79 of 2023.

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Version of the Applicants

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7.0 The applicants filed common written submissions in TSA No.236 of 2023 and SA No.79 of 2023. It is contended that the 1^st defendant bank issued the demand notice on 13.4.2018 demanding a sum of Rs.264.36 lakhs. The applicants had remitted a sum of Rs.1 crores on several dates, by which the account was regularized and the bank also allowed the account to be operated. The interim stay granted by this Tribunal in TSA 236 of 2023 on 31.12.2022 has been duly complied and the said compliance was affirmed by this Tribunal vide its order dated 20.02.2023 in SA No.79 of 2023. During the pendency of TSA 236 of 2023, the applicants have paid a sum of Rs.1,94,75,000/-.

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7.1 Ld. Counsel for the applicants contend that after regularization of the account the defendant bank has not initiated fresh SARFAESI proceedings.

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7.2 The Possession Notice is not served on all the applicants and in this connection referred to the judgment of the Hon’ble High Court of Madras in W.P. No.33561 of 2017 in “ Bharath Post Graduate College Vs. India Bulls Housing Finance Limited ”.

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7.3 The defendant bank failed to give 30 days’ mandatory notice and thus failed to comply with Rule 8(6) of the Security Interest (Enforcement) Rules and referred to the judgment of the Hon’ble High Court of Madras in W.P. No.8020 of 2017 in “ P. Magudeeswaran Vs. The Authorised Officer, Lakshmi Vilas Bank” . The defendant bank failed to serve the sale notice on the 1^st applicant.

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7.4 The defendant bank failed to comply with Rule 8(7) of the Rules in which the sale notice is not affixed on the secured asset. Reliance is placed on the judgment of Hon’ble DRAT Kolkatta in Appeal No.134 of 2018.

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7.5 Ld. Counsel contended that no proper valuation has been taken and the reserve price is very meager and the property has been sold at a throw away price and submitted that as per the judgment of the Hon’ble Supreme Court in Civil Appeal No.5542-5443 of 2023 in CELIR LLP Vs. Bafna Motors submit that the public auction can be set aside in an eventuality where it is found on the basis of material on record that the property had been sold away at a throwaway price.

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Version of the 1^st defendant

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8.0 The demand notice dated 13.04.2018 was received by the borrowers / guarantors and they did not send / raise any objection. The date of NPA mentioned in the notice as 30.09.2016 was not objected or challenged.

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8.1 The Possession Notice issued under Section 13(4) of the Act on 26.09.2018 was duly served on the borrower / guarantors, the same was published in newspapers dated 30.09.2018 and the same was also affixed on the secured asset. The applicants did not choose to challenge the same.

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8.2 It is not correct to say that on making part payments after issuance of the demand notice the status of the account will change. The 1^st sale notice dated 12.8.2021 fixing the auction on 15.09.2021 and the notice was received by all the parties and the said notice was not challenged. The notice was published as per rules and is a valid notice of sale. After receiving the notice the borrower approached the Authorised Officer one day prior to sale i.e., on 14.09.2021 and accepted its default and submitted a OTS proposal by letter dated 14.09.2021 for Rs.1.65 crores and also remitted a sum of Rs.4,80,000/- on 14.09.2021 and also deposited a cheque for Rs.11,70,000/- dated 30.09.2021 and prayed for three months time. Therefore, the request of the borrower was accepted and the auction scheduled to be held on 15.09.2021 was postponed at the oral request of the borrower and evidenced by the letter dated 14.09.2021.

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8.3 The OTS proposal was considered but was not accepted and the said decision was intimated to the borrower by letter dated 27.12.2021. After giving one month’s time the 2^nd sale notice dated 11.2.2022 fixing the auction on 17.3.2022 was issued. The sale notice was dispatched on 11.2.2022, affixed on the secured asset and published in the newspaper. In the 2^nd sale notice due to typographical error it

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was mentioned as notice of 30 days instead of 15 days. Since the 1^st auction was deferred because of the borrower, the 2^nd sale notice was in continuation of the 1^st sale notice and hence the notice is valid.

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8.4 The stay order comes into force only if Rs.1 crore is paid pursuant to the stay order dated 31.03.2022. There is no scope of taking into account Rs.16.50 lakhs paid as an upfront for considering the OTS on 14.09.2021 and 29.09.2021 and the said OTS was also rejected. The payments made previous to the passing of conditional order dated 31.03.2022 cannot be considered as payments towards the compliance of stay order. Thus the applicants have failed to comply with the interim order of this Tribunal.

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8.5 The reserve price was fixed as Rs.1.11 crores based on the valuation report dated 05.02.2021 fixing the realizable value as Rs.100.95 lakhs and market value as Rs.112.17 lakhs. The only objection to the valuation report is that the same was obtained one year back. The other two reports were not available as on 12.8.2021, the date of 1^st sale notice and hence not considered and acted upon. The said reports dated 3.3.2022 are seven months subsequent to the 1^st sale notice. The 2^nd sale notice is 20 days prior to the said two valuations. It is the practice of bank to get valuation on ongoing basis for preparing to the next auction so that the auction process does not get delayed.

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8.6 The grounds of appeal does not plead about two valuation reports and about the average value. The applicants did not object or produce any valuation showing enhanced sale price. In the 1^st sale notice dated 12.8.2022 the reserve price was fixed as Rs.1.11 crores and when the applicants requested for OTS on 14.09.2022 they did not object.

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8.7 As per the decision of the Hon’ble Supreme Court in Alpine Pharmaceuticals the valuation report which is 8 months old can be acted upon. The reserve price for the 1^st sale notice was fixed based on the valuation report dated 05.02.2021 and the valuation report and the reserve price were valid. The applicants were responsible for deferring of the sale, and for the issue of 2^nd sale notice and now the applicants cannot allege that valuation is not recent and they are estopped. There is no question of arriving at average valuation as the only valuation acted upon and the other two valuations were subsequent to the issue of first and second sale notices.

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8.8 Therefore, the auction was conducted strictly in compliance with the provisions of the SARFAESI Act and the Rules made thereunder. The sale certificate was registered in favour of 2^nd respondent. The 1^st sale notice is scheduled to be held on 15.9.2021 was postponed because of the request and the proposal of the applicant for settlement. The 2^nd sale notice dated 11.2.2022 was in continuation of the 1^st sale notice which has given 30 days notice and hence the second notice requires only 15 days notice. Typographical error has crept in the 2^nd sale notice in that instead of mentioning it as 15 days notice it was mentioned as 30 days notice. The valuation report dated 05.02.2021 is the only valuation and relied upon and reserve price was not objected in the letter of the applicants dated 14.9.2021.

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Points for consideration

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9.0 Having heard at length the arguments of the Ld. Counsels appearing on behalf of the parties and after going through the documents available on record, the following point arises for determination in these proceedings: -

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Whether the orders of the Learned CMM, Egmore is suffering from the impropriety or irregularity rendering it void in law?

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Answers to the point for consideration

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10.0 It is to be noted that the Hon'ble Supreme Court in “ NKGSB Co-operative Bank Limited Vs. Suber Chakravarty” and “ R.D. Jain and Company Vs. Capital First Limited CA 1755 of 2022 dated 27.07.2022 ” ruled that no adjudicatory powers are vested while deciding the application under Section 14. In the matter of “Indian Bank Vs. Vishalakshi and Another CA 6295/2015 dated 23.09.2019” , the Hon'ble Supreme Court had further held that the proceedings under Section 14 is a procedural step and purely an administrative order and there is no adjudicatory process involved. Keeping in mind the above rulings, this Tribunal can only examine whether there was compliance of the provisions by the defendant bank before the Learned CMM as mandated under Section 14(1) of the SARFAESI Act.

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10.1 As per Section 14(1) of the SARFAESI Act, on a request being made by the by the secured creditor, the Chief Metropolitan Magistrate or the District Magistrate as the case be take possession of such asset and documents relating thereto and forward such assets and documents to the secured creditor. The financial institutions are to declare under the affidavit the aggregate sum of financial assistance and dues payable as on the date of the application. It should be averred that the borrower / guarantor having created security interest over the property and that the borrower had committed default; upon such default the account must have been classified as NPA. It is also mandatory to aver in the affidavit regarding the issuance of demand notice, the reply thereof and the response of the secured

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creditor and that the borrower had not made any repayment and therefore entitled to take possession and that the other provisions of the Act have been complied.

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10.2 The grounds raised in the petition are that the 1^st defendant bank has failed to issue notices under Section 13(2) and 13(4) of the SARFAESI Act to all the borrowers; The 1^st defendant bank failed to comply with Rule 3A of the SIE Rules; In as much as the 1^st defendant bank did not issue the Section 13(2) notice to the applicants the same has impaired the statutory right of the applicants under Section 13(3A) of the Act; The Authorised Officer has failed to serve, affix and publish the possession notice as mandated under law; The impugned order has been obtained by suppressing the pendency of SA No.143 of 2022 and operation of the interim stay; The amounts are not crystallized before issuance of Section 13(4) notice.

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10.3 In so far as the grounds raised by the applicants in this SA, it is to be seen that the 1^st defendant bank in TA No.236 of 2022 (Old SA No.143 of 2022) has produced all relevant documents to the effect that the bank has complied with the provisions of the SARFAESI Act and the Rules made thereunder. A perusal of the documents filed by the bank at Srl. No.2 to 8 (in TA No.236 of 2022) clearly proves that the contentions of the bank are false and the bank has served the demand notice dated 13.04.2018 on the applicant on 16.4.2018. The possession notice dated 26.09.2018 is served on the applicants on 03.10.2018 and the same is published in “New Indian Express” and “Dinamani” and is also affixed on the secured asset.

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10.4 Further, in the impugned order the Ld. CMM, Egmore has observed in paragraph 5 of the order to the effect that “ The petitioner has followed the procedures laid down u/s 13 and 14 of the Act and as a banking company, the

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petitioner is entitled to get the assistance of this Court and also to get police protection in order to take possession of the schedule mentioned property and to bring the same on sale………”

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10.5 The applicant has not urged any grounds with regard to non-compliance of provisions under Section 14(1) of the SARFAESI Act by the secured creditor.

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10.6. Therefore, in the absence of any allegations regarding non-compliance of the provisions of Section 14(1) of the Act and documentary evidence produced by the defendant bank, this Tribunal is unable to find any illegality, impropriety or otherwise to set aside the impugned order. Hence the following:

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O R D E R

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