Dismissed

Ms Chelpuru Brothers Cloth Sotres v. Union Bank of India (Andhra Bank)

DRT10 Feb 2025SA/93/2022

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal dismissed the Applicants' Securitization Application challenging an auction sale. The Court held that the Bank duly followed procedures under the SARFAESI Act and Rules, finding the pre-possession valuation valid and the sale notice duly affixed, thus rejecting grounds to set aside the sale.

What did the court decide?

Securitization Application dismissed; aforesaid order stands finalized. Pending interlocutory applications disposed of. No order as to costs.

Ms Chelpuru Brothers Cloth Sotres versus Union Bank of… — Execution and Attachment | DRT (2025)

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IN THE DEBTS RECOVERY TRIBUNAL - I AT HYDERABAD

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DATED THIS THE ] OTH DAY OF FEBRUARY, 2025

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PRESENT: GUMMADI GOPICHAND, PRESIDING OFFICER

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sA.No.93/2022

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M/s. Chelpuru Brothers Cloth Stores, Rep. by its Managing Partners, Chelpuru Harish Kumar &Chelpuru Shashi Kiran, H.No.8- 1O- 16, Besides Ashok Electricals, JPN Road, Warangal.

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Mr. Chelpuru Harish Kumar, S/o. Ch. Hema Kumar, aged 33 years, Gender: Male, Occ: Business, R/o.H.No .L5-7 -48, Ramannapet, Warangal.

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Mr. ChelpuruSashi Kiran, S/o. Ch. Anand Kumar, aged 27 years, Gender: Male, Occ: Business, R/o.H.No .15-7 -48, Ramannapet, Warangal.

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Applicants.

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Versus

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Andhra Bank, presently known as Union Bank of India, rep. by its Authorized Officer, Fathima Nagar, L Catholic, Fathima Nagar, Warangal-5o6004.

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Mr. M. Sampath Kumar, S/o. Venkataiah, Aged 53 years, Gender: Male, Occ: Business, R/o.H.No.8- 12-80, Pinnavari Street, PNB Lane, JPN Road, Warangal - 506002. Respondents. (Respondent No.2 is impleaded as per Orders in IA.No.362/ 2023, dt.1 d\ Counsel for tlrc rltg Rauinder Counsel for Respon ?(-'"' iniuasa Rao Chakrala Counsel for R K. Deshpande. q 0 rrB .zom rf w*" W*r#

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sA93l2O22

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.: ORDER:.

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The present Securitization Application is filed by the Applicants uls.l7 of the SARFAESI Act, 2oo2, challenging the proceedings initiated by the 1st Respondent Bank under the said Act against the application schedule propert5r, including the auction of the application schedule property conducted by the 1"t Respondent Bank pursuant to the Notice dt.O2.ll.2ol9, issued under Rules 8(6) & 9(1) of the Security Interest (Enforcement) Rules, 2OO2.

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The averments made by the Appiicants in brief , are as under:-

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The 1"t Applicant firm availed financial facilities from the l"t Respondent Bank by creating security interest over the application schedule property in favour of the lst Respondent Bank. Thereafter, due to demonetization effect and also implementation of GST, the business of the Applicants got affected and payment of loan instalments fell in arrears and the 1"t Respondent Bank sent Demand Notice u/s.13(2) of the SARFAESI Act on 01.08.2019 calling upon the Applicants to pay entire outstanding dues of Rs. 1 , 18,90,0 82 I -. After receipt of the said notice, the Applicants approached the 1"t Respondent Bank and by explaining the prevailing market conditions, requested the 1"t Respondent tsank for grant of time for settling the dues under OTS, to which the 1"t Respondent Bank stated that it would look into the matter and it would get back.

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ii) But, the 1st Respondent Bank, on 08.11.2O19, served a Notice of intendm.2}lg 0n the Applicants, wherein it is au{6tioh on 1.20;q\tet receipt of the said notice, the f*:rL:r.nrud1;",trk,r;,' ;:":"T;:;' #: T:

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sA9312022

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sanctioned limits but, the 1"t Respondent Bank did not consider the same and proceeded for the auction of the application schedule property. Aggrieved by the said action of the l"t Respondent Bank, the Applicants preferred wp.No.1134 of 2o2o before the Hon'ble High court for the state of Telangana and the Hon'ble High court while leaving it open for the Applicants to avail the remedies under the SARFAESI Act, disposed of the writ petition vide order dt.21.03.2022 granted interim stay to enable the Applicants to approach this Tribunal.

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iii) The Authorized officer of the 1"t Respondent Bank without satisfying the ingredients that are necessary for declaration of the subject loan account as NPA and without allowing the Applicants to make good the dues within few months in the light of circumstances prevailing the market, has highhandedly proceeded for the auction of the application schedule property without following the due procedure laid down under the SARFAESI Act. The lst Respondent Bank has not followed Rule 8(1) & (2) of the Security Interest (Enforcement) Rules, while issuing the Possession Notice. The 1"t Respondent Bank has also failed to furnish detailed valuation, reserve price, date and time of sale and thereby violated Rules 8(5) & 8(6) of the Rules, 2OO2. Hence, the SA.

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The lst Respondent Bank filed its Reply statement denying all the adverse allegations made in the SA. The contentions of the lst Respondent Bank, in brief, are as under:-

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i) The Applicant No.1 firm, re,presented by its partners i.e., AppligqrifS: kft,"-3, availed OCC loan of Rs.SO.OO lakhs and ' "P'';ti I &A-

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Te f"" i m "f.L"'' o eia n .Uq$RSE\a lakhs ef RSG from the 1st Respondent against

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.,^{thersecuriLy',pf} "OOB"^{schedule property. Thereafter,the}

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i^{toan .g",9ul!po!Ji+. nnpl$antsbecameNPA on 22.06.2019and} .^{the l"tRespondentgatfik initiated proceedings} under the t'r ""^i,/,/,

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sa 93/2022

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SARFAESI Act, by issuing Demand Notice dt.01.0g.2019 and recalled the entire loan amount and despite receipt of the said notice, the Applicants did not come forward to pay the loan amount. So, the l"t Respondent Bank issued possession Notice dt. 15. 10.2019 and took symbolic possession of the application schedule property and the said notice was also published in two leading newspapers. Finally, the 1"t Respondent Bank issued Sale Notice dt.17.12.2019 fixing the auction of the application schedule property ot 22.01.2O2O.

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ii) Aggrieved by the said Sale Notice dt.l7.l2.2o1g, the Applicants filed WP.No. ll34/2O2O before the Hon,ble High Court for the State of Telangana and the Hon'ble High Court vide order dt.21 .Ol.2O2O, granted stay of confirmation of sale proposed to be held on 22.O1.2O2O subject to petitioner/Applicant depositing 25ok ol the amount mentioned in the Sale Notice within four weeks from the date of order. The Applicants have not complied with the said orders but, mislead the Hon,ble Court that they have deposited the 2So/o of the amount mentioned in the sale notice i.e., Rs.1,18,90,0821'. Finally, the Llon'ble High Court disposed of the said writ petition vide order dt.21.O3.2022 granting 30 days time to the petitioner/Applicant to approach the jurisdictional DRT u/s.17 of the SARFAESI Act and continued the stay granted earlier for the said period of 30 days.

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iii) The Applicants- fited SA.No.93/ 2022 before this Tribunal and a false representation that they have deposited the 25o/o this Tribunal after perusing the orders of the

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Hon Court in WP.No.1 134 l2O2O, granted interim stay of all er proceedings, including registration of sale favour of the auction purchaser and directed the issue urgent notice to the Respondents and posted

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sA93/2022

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the matter to 24.05.2022 for filing of proof of service by the Applicants. But, the Applicants have neither issued any urgent notice to the lstRespondent Bank nor have complied with the orders of the Hon'ble High Court. In the meanwhile, the l "t Respondent Bank confirmed the sale of the schedule property in favour of the auction purchaser and issued Sale Certificate in his favour on 16.05.2022. The 1sr Respondent Bank contended that the Applicants herein by misleading the Court/Tribunal got the said stay orders behind the back of the l"t Respondent Bank and accordingly prayed for the dismissal of SA.No.93l2022.

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'l'he 2"d Respondent-auction purchaser reported no Reply Statement on his behalf.

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This Tribunal after hearing both the parties, allowed the SA vide order dt.05.O9.2023 by setting aside the auction sale of the schedule property conducted by the lst Respondent bank on 22.O1.2O2O and the consequential Sale Certificate dt.16.OS.2022 issued in favour of the 2"d Respondent on the premise that the lst Respondent Bank lailed to produce the valuation report in respect of the schedule property and so, the Bank has not followed Rule 8(5) of Security Interest (Enforcement) Ru1es, 2OO2 and the lst Respondent Bank also failed to establish that it has affixed the sale notice on the schedule property and thus violated the provision of Rule 8(7) of Security Interest (Enforcement) Rules, 2002.

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Challenging the said order dt.05.09.2o23, the Respondent No.2, auction purchaser Iiled Appeal No.72312O22 before the Hon'ble ta and the said appeal was allowed vide order the matter is remanded back to this Tribunal to h on the observations made in the bodv of the

Judgement DRAT.

sA 93/2022

It is pertinent to note that during the course of hearing in the Appeal No.12312O22 before the Hon'ble DRAT, Kolkata, the Appellant therein filed relevant materiai documents for establishing that the 1"t Respondent bank has complied with Rule 8(5)&(7) of Rules, 20O2. So, an observation is made in the judgment passed by the Hon'ble DRAT that in view of the filing of the relevant material documents by the auction purchaser, the matter to be re-heard and decided by the Ld. DRTafresh as to whether Rule 8(5)&(7) of Rules, 2002 are duly complied with by the secured creditor or not.

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After receiving the order in Appeal No.l23 12023 from the Hon'b1e DRAT, Kolkata and during the course of hearing in the present SA after remand from the Appellate Tribunal, the lst Respondent Bank filed certain material documents viz., valuation report dt. I 5. 10.20 19 and copies of photographs showing aflixture of the Sale Notice dt.17.12.2019 and copies of paper publication of the said sale notice.

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Heard arguments of both the parties and perused the written arguments filed by the Respondent No.2, Auction purchaser and Applicants.

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Now, the points that arise for consideration are,-

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Whetlrer the Applicants haue established anA ualid grounds for settirLg aside the auction sale of the application schedule propertA conducted by the 1"t Respondent Bank on 22.01.2020 pursuant 2.2019?

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s^93/2022

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During the course of arguments, Ld. Counsel for the Applicants argued that the l"tRespondent Bank has not forowed the provisions of SARFAESI Act,2oo2 and Rules made thereunder in conducting auction of the schedule property and that the possession notice was issued by the lstRespondent Bank on 15.ro.2o19 whereas the inspectionof the schedule property was made bythe approved valuer of the Bank on 74.7o.2or9 i.e.prior to issuance of possession notice and so, the valuation repot obtained by the lstRespondent Bank in pursuance ofthe inspection made by the approver valuer of the Bank cannot be taken into consideration. It is further argued that in the copies of photographs filed by the 1st Respondent Bank, the particulars of the notice allegedly affixed on the schedule property are not legible and so, it cannot be said that the 1st Respondent bank has affixed the sale notice on the schedule property and so, the sale conducted by the l"t Respondent Bank in respect of the schedule property on 22.01.2020 is liable to be set aside.

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Per contra, Ld. Counsel for the l"t Respondent Bank argued that the lst Respondent Bank has scrupulously followed the procedure laid down under the provisions of SARFAESI Act, 2OO2 and, Rules made thereunder in conducting auction of the schedule property and there is no obligation on the part of the lst Respondent Bank that the valuation report shall be obtained subsequent to the issuance of the possession notice but as per the proviso under Rule g(5) of Rules, 2OO2, the valuation report has to be obtained prior to issuance of sale notice in respect of the immovable property and thus the valuation report obtained by the 1"t Respondent Bank is perfectry valid and legal and basing on the said valuation only, reserve price is fixed by the dent Bank in'respect of the schedule propertlr. Ld. ppondent also argued that the Bank has duly.1 SARFAESI Act,2OO2 and Rules, 2002 schedule property and also duly Security Interest (Enforcement) Rules, 'l,i€d,,?tfl 'lt.r^{ilEB &s *tzjt}

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W"*,a9

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sA93/2022

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2oo2 and so, the Respondent No.2 is a bonafide purchaser of the schedule property in the auction conducted by the l"t respondent Bank in respect of the schedule property and in view of the above, the SA is liable to be dismissed.

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Along with the Reply, the 1"t Respondent Bank filed material documents. After remanding the matter back to this Tribunal also, the 1st Respondent Bank filed certain material documents for establishing that the bank has duly affixed the sale notice on the schedule property. In fact, Respondent No.2, Auction purchaser also filed certain documents along with a memo, particularly, valuation report and copies of photographs showing affixture of the sale notice on the schedule property.

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As per the documents filed by the lstRespondent Bank, it is quite clear that the l"t Respondent Bank has issued demand notice u/s 13(2) of the SARFAEST Act,2oo2 on 01.08.2019 and the said notice was receivedby the Applicants as evidenced by the signaturesof the Applicants on the office copy of the said notice. Thereafter the lst Respondent Bank issued possession notice dt.15. to.2o19 and the said notice was also received by the Applicants as evidenced by the signatures of the Applicants on the copy of the said notice. The said possession notice was affixed on the schedule propert5r as depicted in the photographs filed by the 1st Respondent Bank and the said notice was also published in Telugu and English daily newspapers as evidenced by the copies of paper publication filed by the 1st Respondent Bank.

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l"t Respondent bank issued Pre Sale Notice u/r 8(6) (Enforcement) Rules,2002 dt.O2.ll.2olg for o the Applicants to redeem the secured asset. nts received the said notice however, the any steps for redeeming the secured asset.

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sA93/2022

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So, the lst Respondent bank proceeded to conduct auction of the schedule property by issuing sale Notice dt.17. 12.2019 fixing the date of auction on 22.o1.2o2o. The said sale notice was admittedly received by the Applicants. As per the documents filed by the l"t Respondent Bank, it is clear that the said sale notice was published in two daily newspapers as evidenced by the copies of paper publication filed by the bank.

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t6.

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As per the documents filed by the 1st Respondent, it is also clear that on 15.10.2019, the lst Respondent Bank obtained valuation report form the approved valuerln.JoguUmpati. In the said valuation report, the approved valuer has stated that he has inspected the schedule property on 14.70.2019 and he mentioned the market value of the schedule property as Rs.1,07,80,0oo1-, realizable sale value of the property is loo/o less on market value i.e. Rs.97,02,0oo/- whereas Distress value of the property is 20yo less on market value i.e.Rs.86,24,OOO l-

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t7. Rule 8(5) of Security Interest (Enforcement) Rules, 2oo2 deals with the necessity for obtaining valuation from the approved valuer for fixing reserve price of the secured asset which reads as follows:

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(5) Before effecting sq.le of the immoaable propertg referred, to ln sub-ttle (1) of Rule 9, the authorized officer shq.ll obtain aaluqtion of the propertg from on approaed. ualuer and in consultation with the secured creditor, ftx^{thereserue prlce} of the^propertg and mag sell the whole or ang part of such immouable secured asset bg "s^*r., ang vJ of the urLtc Jv..rtu,r.rLg following ,tLyLtLt ltmethods:

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t^\ bg obtaining quotations from the persons dealing "., \l^{withsimilar securedorssetsor otherutise interested in}

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bg inuiting tenders from the public;

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sA93/2022

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18' There is no dispute regarding the fact that the Possession notice was issued by the lstRespondent Bank on 15.10.2019 u/s 13(4) of SARFAESI Act, 2OO2 for taking symbolic possession of the secured asset. As per Rule 8(5) of Securitylnterest (Enforcement) Rule s, 2OO2, it is clear that the valuation report of the immovable property shall be obtained from the approved valuer for the purpose of fixing reserve price of the property before effecting the sale. So, only for the purpose of fixing reserve price, thereis obligation on the part of the secured creditor to obtain valuation report form the approved valuer. In the instant case, valuation report was given by the approved valuer on 15.10.2019, incidentalry, on the same d.y, the 1'tRespondent Bank issued possessionnotice to the Applicants. Issuing possession notice u/s 13(a) of the Act, 2OO2 is a first step for conductingauction of a particular property by the secured creditor after issuing demand notice as contemplated u/s 13(2) of the SARFAESI Act, 2oo2. so, there is no wrong on the part of the secured creditor in obtaining valuation report on the very same day, the possession notice was issued by them. After issuing possession notice, the secured creditor is expected to issue notice u/r 8(6) of Security Interest (Enforcement) Rules, 2OO2. In the instance case, pre-sale notice ulr s(6) of Rules, 2oo2 was issued by the lst Respondent Bank on 02.1I.2019 and in the said notice, there is a

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gfion^{about the fact} that the reserve price of the schedule property at Rs.97,02,OOOl- If the Pre-sale notice or Sale notice later to the valuation report obtained by the Bank, the ,icants^{are entitled tocontend} that the said valuation i I .trlqFoff9rrn"v--"[, be binding on them as the same is obtained much prior to lixirig'.the rescrve price. But in the instant case, the valuation ,1-:r_ repo.rt wfls p'btained on 15.09.2019 whereas pre-sale notice under ^'?r"^{,' 'ri'":i: . .} .:^- ?:4uJ€'",8(6) of Rules, 2oo2 was issued on 02. LL.20219 and accordingly, - ' - ^.,)-.r,;'" 10

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sA93/2022

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the said valuation report obtained by the l"t Respondent Bank in respect of the schedule property is perfectly legal and valid and the same is obtained as per the provision of Rule 8(5) of Security Interest (Enforcement) Rules, 2OO2.

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As per the copies of photographs filed by the 1"t Respondent Bank and also Respondent No.2, Auction purchaser, it is very clear that the sale Notice dt. 17.12.2019 is aflixed on the schedule property as depicted in the copies of photographs filed by the 1"t Respondent Bank. Admittedly, the said sale notice was published in two daily newspapers. Rule 8(7) of Security Interest (Enforcement) Rule s, 2oo2 contemplates that the sale notice shall be affixed on the conspicuous place of the immovable property. Thus, it is clear that the 1st Respondent Bank has duly followed Rule g(7) of Security Interest (Enforcement) Rules, 2oo2 by affixing the sale notice on the conspicuous place of the schedule property.

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As per the record, it is clear that in the auction conducted by the lst Respondent Bank on 22.o1.2o2o, the 2nd Respondent became successful bidder in resect of the schedule property and he paid the entire bid amount of Rs.1,47,52,ooo1- and sale certificate was also issued in his favour.

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So, considering all the circumstances, I hold that the 1st Respondent Bank has scrupulously followed the procedure, laid down under the provisions of SARFAESI Act, 2OO2 and Rules made thereunder,more y Rule 8(5)&(7) of Rules, 2oo2 by obtaining valuation report valuer of the Bank and by affixing the sale notice

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ous place of the secured asset, in conducting auction

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I I ijso,-F .', of^'the .-.1 .-i,r-- s'e''6lno schedulejrproperty grpdnd ;'; i; warranting pursuant the to interference the sale Notice of this Tribunal withdt. lz.l2.2olg.

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i fr: r'. .

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1.1

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l ...'iit' q ..' ,ir' . ; r'-i '-.,,?;:.7 lt' , ",.^,u.i

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sA93l2O22

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the auction conducted by the lst Respondent Bank in respect of the schedule property on 22.o1.2o2o. so, in the circumstances, thepresent SA filed by the Applicants is liable to be dismissed as there are no merits. Accordingly, this pointis answered against the Applicants and in favour of the Respondents.

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Point No.(iil:-

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In the result, the present Securitization Application is dismissed. Consequently, the Interlocutory Applications, pending if any, shall stand disposed of. No order as to costs.

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Communicate a copy of this order to the parties concerned.

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(Dictated to the P.S, transcribed bg her, corrected, signed and pronounced bg me in the open court on this the lOh dag of February, 2025)

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sd/_ (G. GOPr CHANDI PRESIDING OFFICER

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1.2

Ms Chelpuru Brothers Cloth Sotres v. Union Bank of India (Andhra Bank)

Case brief

What is this about?

What did the court decide?

Ms Chelpuru Brothers Cloth Sotres v. Union Bank of India (Andhra 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

All orders in this case

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