Allowed

The Khalsa Nirbhai Transport Company Pvt. Ltd. v. Catholic Syrian Bank Limited and Others

DRT20 Jan 2026SA/193/2025

Case brief

AI extract

What is this about?

The Dhartul Rain Nyayapit quashed proceedings initiated by CSB Bank Ltd. against the applicant company for recovery of dues. The tribunal held the classification of the loan account as NPA was illegal due to non-compliance with mandatory procedures and that the service of the possession notice was not proved. Case allowed with leave to initiate fresh proceedings.

What did the court decide?

The Securitization Application was allowed; all proceedings initiated by the respondent banks under the Act were quashed.

The Khalsa Nirbhai Transport Company Pvt. Ltd. versus Catholic… — Banking and Recovery | DRT (2026)

¶1

DEBTS RECOVERY TRIBUNAL-III, CHANDIGARH

¶2

PRESIDED OVER: SH. MRIDULESH KUMAR SINGH

¶3

SECURITIZATION APPLICATION NO.193/2025

¶4

Date of Institution: 18.06.2025 Date of Decision: 20.01.2026

¶5

The Khalsa Nirbhai Transport Company Pvt. Ltd., Registered Office: Kartar Complex, Jalandhar Byepass Chowk, Ludhiana-141005 (Punjab) through its Director/Authorised Signatory

¶6

--Applicant

¶7

Versus

¶8

CSB Bank Ltd. (formerly known as Catholic Syrian Bank Ltd.), having branch office at 148, Industrial Area-A, Near Cheema Chowk, Ludhiana 141 003 (Punjab) through its Authorized Officer

¶9

CSB Bank Ltd. (formerly known as Catholic Syrian Bank Ltd.), having branch office at 148, Industrial Area-A, Near Cheema Chowk, Ludhiana 141 003 (Punjab) through its Branch Head

¶10

The Collector (Additional Commissioner), Ludhiana

¶11

The Tehsildar-cum-Executive Magistrate, Ludhiana (East) Ludhiana (Punjab)

¶12

--Respondents

¶13

Argued by: Sh. Diwan Sharma, Advocate for Applicant None for Respondent Nos.1 & 2 Respondent Nos.3 & 4 already ex parte vide order dated 23.06.2025

¶14

FINAL ORDER

¶15

(1) This Securitization Application was filed under Section 17 (1) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as ‘the Act’ for brevity) to declare the classification of loan account as NPA on 22.07.2022 as illegal, to set aside notice under Section 13(2) of the Act dated 15.09.2022, notice under Section 13(4) of the Act dated 31.03.2023, order dated 30.10.2023 and 22.02.2024 passed by CJM, Ludhiana

¶16

¶17

SA/193/2025

¶18

THE KHALSA NIRBHAI TRANSPORT COMPANY PVT. LTD. VS. CATHOLIC SYRIAN BANK LIMITED AND OTHERS

¶19

under Section 14 of the Act as illegal, arbitrary and against the provisions of the Act and Rules thereof. (2) It was stated in the application that applicant is a Pvt. Ltd. Company and had purchased a property i.e., House No.B-VII-755 (P) being Evacuee property through public auction conducted by custodian Evacuee property Punjab vide certificate of sale issued by District Competent Officer, Ludhiana; that presently the new Number of the property in the Municipal Record is B-VII1083; that the then Director of the applicant company had owned another Company titled as M/s Preet Builders Private Ltd., with different objectives; that applicant company had leased out the aforesaid property to the said company M/s Preet Builders Private Ltd. by way of notarized Lease Deed on 06.04.1999 for a period of 20 years commencing from 03.03.1999; that in terms of the said lease deed the applicant company had given to the lessee company the right to mortgage the lease rights in favour of Punjab Financial Corporation, Chandigarh or create any type of charge of any bank or financial institution on the building so constructed by the lessee on the lease premises without any objection or permission from the lessee as the lessee shall be entitled to exercise all rights of ownership on the building so raised on the leased premises; that the said lessee company - M/s Preet Builders Private Ltd., constructed a building on the said property which is now known as Hotel Traksonz; that the lessee company - M/s Preet Builders Private Ltd. had availed certain credit facilities from respondent Nos. 1 & 2 in the year 2005 which were enhanced/decreased from time to time i.e., ODM Limit of Rs.325 lakh, Term loan limit of Rs.65 Lakh and FITL of Rs.61 Lakh on 17.09.2021 as per sanction letter of restructuring of credit facilities; that the credit facilities were availed against the following securities i.e.,

¶20

(A) Primary Security: Hypothecation of goods/book debts etc. Hypothecation of Solar Panel from OMEGA Overseas, Hypothecation of entire stock and book debts lying at property constructed on plot measuring 1200 sq. yards bearing Municipal No. B-VII-755 (Old) and ВVII1083 (new) situated at G.T. Road, opposite Railway Station, Ludhiana now known as Hotel Traksonz or any other places.

¶21

¶22

SA/193/2025

¶23

THE KHALSA NIRBHAI TRANSPORT COMPANY PVT. LTD. VS. CATHOLIC SYRIAN BANK LIMITED AND OTHERS

¶24

(B) Collateral Security: All that part and parcel of the property constructed on plot measuring 1200 sq. yards bearing Municipal No. B-VII-755 (Old) and B-VII1083 (new) situated at G.T. Road, opposite Railway Station, Ludhiana now known as Hotel Traksonz owned by applicant - M/s Khalsa Nirbhai Transport Co. Pvt. Ltd. and bounded on East Kundan Vidya Mandir.

¶25

It was further stated that applicant had furnished a declaration cum affidavit dated 26.10.2021 stating therein that the immoveable property/subject property of the applicant was already mortgaged with respondent Nos. 1 & 2 as security for the credit facilities in the name of M/s Preet Builder Pvt. Ltd. i.e. (a) Term loan of Rs.65.00 Lakh (b) ODM Limit of Rs.325.00 Lakh would be further mortgaged and charged to the respondent Nos. 1 & 2 as security for the credit facilities in the name of M/s Preet Builders Pvt. Ltd. i.e., Term loan of Rs.62.28 Lakh, ODM Limit of Rs.325.00 lakh and FITL Limit of Rs.61.00 lakh; that applicant company had also executed guarantee agreement on already printed proforma/document contents of which were never read over to the applicant and also signed already printed Form i.e., memorandum of 3rd extension of mortgage by deposit of title deed and contents; that respondent Nos. 1 & 2, all of a sudden issued a notice dated 15.09.2022 under Section 13(2) of the Act intimating the principal borrower - M/s Preet Builder Pvt. Ltd. and the guarantors that they have failed and neglected to pay and committed default in repayment of aforesaid secured financial assistance as per the terms of the sanction/loan documents and security documents, accordingly the bank has classified the loan accounts as NPA on 22.07.2022; that the principal borrower raised objections to the said notice vide letter dated 12.11.2022; that the said objections were rejected by the respondent Nos. 1 & 2 on evasive grounds vide letter dated 23.11.2022; that thereafter respondent Nos. 1 & 2 issued possession notice dated 13.03.2023 stating therein that the possession of the property has been taken over by the bank on 13.03.2022, however later on respondent Nos. 1 & 2 realized its gross mistake and issued a fresh notice dated 31.03.2023 stating therein that Authorised Officer has taken the possession of the

¶26

¶27

SA/193/2025

¶28

THE KHALSA NIRBHAI TRANSPORT COMPANY PVT. LTD. VS. CATHOLIC SYRIAN BANK LIMITED AND OTHERS

¶29

subject property on 31.03.2023 but this notice was never served upon the applicant; that respondent Nos. 1 & 2 filed an application under Section 14 of the Act on 27.09.2023 before the Court of learned CJM, Ludhiana, which was registered as CRM No.71278 of 2023; that the Principal Borrower as well as the applicant filed objections vide CRM No.74165 of 2023 before the Court of learned CJM, Ludhiana in the application filed by the respondent Nos. 1 & 2 under Section 14 of the Act and submitted that there was no valid mortgage of the property in question because the alleged mortgage was on the basis of certificate of sale which was not registered as per the Registration Act, therefore the property in question could not be enforced; that further there was no registration with Central Registry as per Section 26 (D) of the Act and further the applicant herein (respondent no.4 in application under Section 14 before learned CJM) was not in possession of the property and as it had given the property on lease to the Principal Borrower, therefore, the said application was liable to be rejected; that the learned CJM, Ludhiana rejected the said objections and allowed the application filed by respondent Nos. 1 & 2 vide unreasoned order dated 30.10.2023 and warrant of possession of the property in question along with copy of the order was issued to the collector concerned for execution as per law; that the Principal Borrower filed SA No.304/2023 before this Hon'ble Tribunal on 24.11.2023 challenging the entire action of the respondent Nos. 1 & 2 initiated under the Act including order dated 30.10.2023 passed by the learned CJM, Ludhiana; that one Mr. Iqbal Singh, filed Company Petition on 19.01.2024 under Section 95 of the IBC Code 2016 read with Rule 7(2) of the IBC for Resolution of the debt outstanding against the Principal Borrower - M/s Preet Builders Pvt. Ltd., and the guarantors including the applicant before NCLT, Chandigarh and it also issued a notice dated 22.01.2024 to the Principal Borrower and the guarantor stating therein that a petition under Section 95 of IBC and in terms of Section 96 of IBC Code 2016 was filed and as per law the filing of petition under Section 95 of IBC Code was deemed stay on the enforcement/alienation of any of the asset, debts any other legal action or proceedings

¶30

¶31

SA/193/2025

¶32

THE KHALSA NIRBHAI TRANSPORT COMPANY PVT. LTD. VS. CATHOLIC SYRIAN BANK LIMITED AND OTHERS

¶33

pending in respect of any debt etc. of the corporate debtors and personal guarantors; that the principal borrower brought the said notice to the knowledge of the learned District Collector/ADC Ludhiana, who vide order dated 22.01.2024 referred the matter to the learned CJM, Ludhiana for further order in the matter in view of the operation of the deemed stay under Section 96 of IBC Code due to filing of the petition under Section 95; that the learned CJM, Ludhiana illegally and arbitrarily and in a very casual and mechanical manner reviewed the earlier order dated 30.10.2023 and vide order dated 22.02.2024 has been pleased to hold that respondent Nos. 1 & 2 wants to take possession of the property owned by respondent No. 4 (applicant herein) who executed his guarantee in favour of respondent Nos. 1 & 2 and that respondent no.4 (the applicant herein) is not a Corporate Debtor rather he is personal guarantor of Corporate Debtor, so the protective provision of IB Code are not applicable to the personal guarantor of Corporate Debtor and the property mortgaged with respondent Nos. 1 & 2 is owned by personal guarantor (applicant herein), hence the present case would proceed only against the property of personal guarantor/applicant; that consequently, warrant of possession of property of personal guarantor were ordered to be issued to the collector concerned for 08.04.2024; that thereafter, the matter between the Principal Borrower and respondent Nos. 1 & 2 was compromised and an OTS proposal submitted by the Principal Borrower was accepted by respondent Nos. 1 & 2 vide letter dated 26.03.2024 and in terms of the settlement, the Principal Borrower deposited a sum of Rs.2.50 Crores and rest of the amount was to be deposited in 4 installments; that it was further submitted by the counsel for respondent Nos. 1 & 2 that if applicant fails to deposit the amount as per terms and conditions of the OTS, the bank would be free to initiate SARFAESI proceedings and in light of the said OTS the SA had become infructuous; that the counsel for the SA applicant has not opposed the prayer of dismissal of the SA, so Hon'ble Presiding Officer, DRT-III, Chandigarh dismissed the SA as infructuous; that on approval of the OTS proposal and in view of the order dated 02.04.2024 passed by Hon'ble DRT-III,

¶34

¶35

SA/193/2025

¶36

THE KHALSA NIRBHAI TRANSPORT COMPANY PVT. LTD. VS. CATHOLIC SYRIAN BANK LIMITED AND OTHERS

¶37

Chandigarh, the SARFAESI proceedings as well as the order dated 30.10.2023 and 22.02.2024 passed by learned CJM, Ludhiana had become redundant and not executable and respondent Nos. 1 & 2 could initiate fresh SARFAESI proceedings if the terms and conditions of the OTS not fulfilled by the borrowers; that therefore, it was obligatory on the part of respondent Nos. 1 & 2 to put on record all these developments before the Court of learned CJM, Ludhiana but respondent Nos. 1 & 2 did not brought all these developments to the knowledge of the learned CJM, Ludhiana with the result learned CJM passed order dated 08.04.2024 directing to issue fresh warrant of possession of the property of the personal guarantor Nirbha Transport Company Pvt. Ltd. to the collector concerned for 22.07.2024; that respondent Nos. 1 & 2 again approached the learned CJM, Ludhiana and filed an application for appointment of Receiver in place of the Collector for execution of the order dated 30.10.2023 and 22.02.2024 to assist the bank to deliver the physical possession of the mortgaged property after taking assistance of the SHO of the concerned area; that respondent Nos. 1 & 2 had on the one hand filed an application before the learned CJM, Ludhiana with a prayer to appoint an Advocate receiver to take the possession of the subject property which is pending for 12.07.2025 and on the other hand it again approached the Tehsildar cum Executive Magistrate to issue notice for taking the physical possession of the property and the learned Tehsildar without having any knowledge of the application filed by respondent Nos. 1 & 2 for appointment of receiver and replacing the collector concerned, issued the notice dated 04.06.2025 for taking possession of the subject property on 25.06.2025; that the entire action initiated by respondent Nos. 1 & 2 under the provisions of the Act and the order dated 30.10.2023 and subsequent order dated 22.02.2024 passed by learned CJM, Ludhiana under Section 14 of the Act are grossly illegal. Therefore, it was prayed that the present SA may kindly be allowed.

¶38

(3) After service of notices upon respondents, respondent Nos.1 & 2 were appeared through counsel and filed reply to SA.

¶39

7 SA/193/2025

¶40

THE KHALSA NIRBHAI TRANSPORT COMPANY PVT. LTD. VS. CATHOLIC SYRIAN BANK LIMITED AND OTHERS

¶41

(4) None was appeared on behalf of respondent Nos. 3 & 4 and no reply was filed on behalf of them. Therefore, respondent Nos. 3 & 4 were proceeded ex parte vide order dated 23.06.2025.

¶42

(5) In the reply filed by respondent Nos. 1 & 2 it is stated that applicant has not approached this Tribunal with clean hands; that principal borrower had earlier filed an application under Section 17 of the Act i.e., SA No. 304/2023, which the Principal Borrower withdrew vide order dated 02.04.2024 on account of the fact that having admitted their liability to the Respondent No.2, the Principal Borrower and Guarantors had entered into a One Time Settlement agreement with Respondent No.2; that the said SA was not withdrawn or dismissed with any liberty to re-apply; that applicant has suppressed material facts and have attempted to suggest falsehoods to this Tribunal; that on 24.11.2023, the Principal Borrower had filed SA No. 304/2023, challenging the very same SARFAESI proceedings as being challenged in the present SA; that the Principal Borrower and the present applicant have the same directors; that pertinently, one Mr. Harpreet Singh, the signatory to the present SA has been a director in both, the Applicant herein and the Principal Borrower, since 28.03.2017; that during the pendency of SA No. 304/2023, Mr. Harpreet Singh, the common director (and also a personal guarantor), the Principal Borrower, the present Applicant (and also the lessor and mortgagor of the Secured Property) and Mrs. Kartar Kaur (personal guarantor) in the month of February 2024, approached the respondent No. 1 with a One-time Settlement Proposal of INR 4.7 Crores to be paid in a period of 9 months; that upon due consideration of the promises and representations made by the Borrowers and Guarantors, respondent No.2 accepted a settlement offer of INR 4.75 Crores, payable in 5 instalments on or before 15.12.2024; that it was clarified to the Borrower and Guarantors that failure to abide by the above repayment schedule, among other terms, would result in automatic cancellation of the OTS and that respondent No.2 would be at liberty to continue its efforts towards recovery of its dues in accordance with law; that in view of the OTS, the Principal Borrower's SA No. 304/2023, which

¶43

¶44

SA/193/2025

¶45

THE KHALSA NIRBHAI TRANSPORT COMPANY PVT. LTD. VS. CATHOLIC SYRIAN BANK LIMITED AND OTHERS

¶46

challenged the same SARFAESI measures as the present SA, came to be dismissed as infructuous vide this Tribunal's order dated 02.04.2024; that the Borrower and Guarantors breached the terms of the OTS, when they failed to pay the 4th instalment of INR 55 Lacs, which was required to be paid on or before 31.10.2024, thus respondent No.2 was constrained to cancel the OTS vide its letter dated 01.11.2024; that thus, under the garb of challenging the Impugned Notice, the present applicant is re-agitating the same issues before this Tribunal, while suggesting that the applicant entity, despite having common Directors with the Principal Borrower and having consented to the mortgage of the Secured Property in favour of respondent No.2 is newly challenging the respondent No. 2's SARFAESI measures; that the present SA is barred by the principle of constructive res-judicata , inasmuch as the issues raised in the present SA were directly in issue in SA No. 304/2023 filed by the Principal Borrower and stood concluded upon its dismissal as infructuous pursuant to the OTS, especially when such dismissal on the grounds of OTS was not challenged by the Borrower and Guarantors; that respondent No.2 has strictly adhered to the due process mandated under the Act and the Rules; that applicant has failed to plead or demonstrate any instance of deviation from the statutory scheme; that applicant and the Principal Borrower-represented and controlled by common directors and the guarantors have unambiguously admitted their liability to repay the debt owed to respondent No.2 by voluntarily proposing and entering into the OTS; that payment of at least two instalments in furtherance of the OTS is further evidence of acknowledgment of debt; that it is an admitted fact that on the request of Principal Borrower and based on the representations and assurances made on its behalf, respondent Nos. 1 & 2 sanctioned an ODM Credit Facility of Rs. 03 Crores on 03.03.2005, which came to enhanced to the tune of Rs.04.75 Crores; that this ODM Credit Facility was later enhanced to Rs.05.97 Crores on 17.04.2010; that on the request of principal borrower, the ODM Credit Facility was reduced by a sum of Rs.50 Lacs on 30.08.2018 and by a sum of Rs.02.25 Crores on 31.07.2019; that thus, the ODM Credit Facility came to

¶47

¶48

SA/193/2025

¶49

THE KHALSA NIRBHAI TRANSPORT COMPANY PVT. LTD. VS. CATHOLIC SYRIAN BANK LIMITED AND OTHERS

¶50

be reduced to a sum total of Rs.03.25 Crores and thereafter, by way of a Covid-19 Relief Loan, respondent No.2 sanctioned a Term Loan of Rs.65 Lacs on 08.07.2020, which was later restructured to a sum of Rs.62.28 Lacs; that thereafter, respondent No.2 sanctioned a Funded Interest Term Loan of Rs.61 Lacs on 26.10.2021; that the credit facilities were secured by way of mortgage by deposit of Title Deeds of the secured property, hypothecation of Solar Panel from OMEGA Overseas, hypothecation of the entire stock and book debts lying at the secured property, personal guarantees by Mr. Harpreet Singh, Ms. Karta Kaur and Guarantee by the present applicant; that the security in question was duly registered with the Central Registry; that on account of continuous and uncured defaults of the terms of sanction of the Credit Facilities, the respondent No.2 was constrained to classify the loan accounts as NPA on 27.07.2022 according to the guidelines of the Reserve Bank of India; that thereafter, on 15.09.2022 respondent No.2, through its duly Authorised Officer issued a demand notice dated 15.09.2022 under Section 13(2) of the Act; that the said notice was duly served upon the parties by way of e-mail dated 14.11.2022 by hand delivery on 11.11.2022 and also through registered post; that on 12.11.2022; that applicant had raised certain objections under Section 13(3-A) of the Act; that in accordance with the provisions of the Act, respondent No.2 considered the objections raised by the applicant; that on 23.11.2022 respondent No.2 rejecting the false, misleading and frivolous contents of the objections moved by applicant; that thereafter on 31.03.2023, Authorised Officer of the respondent No.2 took symbolic possession of the secured property under Section 13(4) of the Act; that this symbolic possession notice was duly published in the newspaper ‘Business Standard’ English and in Punjabi Language Newspapers on 04.04.2023; that symbolic possession notice was also dispatched by way of registered post also; that thereafter on 27.09.2023, respondent No.2 filed an application under Section 14 of the Act before the Chief Judicial Magistrate, Ludhiana, Punjab seeking assistance to take physical possession of the secured property; that the Borrower and Guarantors filed their objections to the applicant

¶51

¶52

SA/193/2025

¶53

THE KHALSA NIRBHAI TRANSPORT COMPANY PVT. LTD. VS. CATHOLIC SYRIAN BANK LIMITED AND OTHERS

¶54

under Section 14 of the Act, objecting on frivolous grounds to the SARFAESI measures initiated by respondent No.2; that on 30.10.2023 application under Section 14 of the Act was allowed and the objections raised by the borrower and mortgagor came to be rejected; that on 04.06.2025, respondent No.4 herein issued impugned notice to take physical possession of the secured property with assistance of the police and handover the same to the Authorised Officer of the respondent No.2 and on 18.06.2025, the present SA came to be filed by the applicant; that the borrower and guarantors attempted to abuse the process of law by addressing a letter to the Collector (A.D.C.) Ludhiana, Punjab by relying upon a false and collusive IBC petition to claim benefit of the interim moratorium under IBC; that this Tribunal ought to take a very strict view of such conduct of the borrower and the guarantors; that the present SA is nothing but a calculated stratagem to obstruct, delay and frustrate the lawful enforcement actions initiated by respondent Nos. 1 & 2 in accordance with the mandate of the Act. Therefore, it was prayed that the present SA may kindly be dismissed being devoid of any merits with exemplary costs.

¶55

(6) Replication filed by applicant to the reply filed by respondent Nos. 1 & 2, wherein the contents of SA were reiterated and that of the reply to the SA were denied.

¶56

(7) I have heard arguments advanced by Sh. Diwan Sharma, Advocate for Applicant and gone through the record carefully. None was present on behalf of respondents for advancing arguments.

¶57

(8) Sh. Diwan Sharma, Advocate argued that loan accounts of applicant were classified as NPA on 22.07.2022 in violation of Section 2(1)(O) of the Act. It was further argued that it was mandatory on the part of the respondent Nos.1 & 2 to classify the accounts as substandard, doubtful or loss and intimate the same to the applicants before issuing the notice under Section 13(2) of the Act. It was further argued that it is settled law that before classifying the account as NPA, it is the essential requirement that the bank should provide an opportunity to the borrower for settlement of the controversy/doubts regarding classification of the assets.

¶58

11 SA/193/2025

¶59

THE KHALSA NIRBHAI TRANSPORT COMPANY PVT. LTD. VS. CATHOLIC SYRIAN BANK LIMITED AND OTHERS

¶60

(9) In the reply to SA, it was not mentioned by respondent Nos. 1 & 2 that they have informed regarding the classification of loan accounts as NPA to applicant or not.

¶61

(10) Sh. Diwan Sharma, Advocate placed reliance upon the judgment passed by the Division Bench of Hon’ble High Court of Punjab and Haryana at Chandigarh in CWP No.6306/2007 titled as Bhupinder Singh Vs. State Bank of Patiala and Others, wherein it was observed as under:

¶62

“It is only when the account of the borrower became sub-standard, doubtful or total loss, then the account of a borrower becomes classifiable as NonPerforming Asset and it is only then the Act came into operation. Clause (o) of sub-section (1) of section 2 of the Act defines Non-Performing Asset which means an asset or account of a borrower which has been classified by the Bank as sub-standard, doubtful or loss asset. In the instant case the respondent bank in spite of the direction, has not placed on record the account of the borrower where the same was classified by the Manager of the respondent bank as sub-standard, doubtful or loss asset. Merely, on the basis of the aforesaid list, in our opinion it cannot be held that the account of the petitioner was declared as NPA legally.”

¶63

(11) Sh. Diwan Sharma, Advocate further placed reliance upon the judgment passed by Hon’ble Jharkhand High Court in the matter M/s Stan Commodities Pvt. Ltd. Vs. Punjab and Sind Bank, 2009 AIR JHAR 14 in which Hon’ble High Court has observed as under:

¶64

“ 28. In view of the provisions of the guidelines of the RBI, the petitioner was entitled to be informed and any doubt or dispute was to be settled between the creditor and the borrower through any specific internal channel within one month from the date on which the account would have been classified as NPA. Even if there was no internal channel to settle such dispute/doubt, the petitioner was entitled to be informed and to get an opportunity to explain or represent against the intended classification of his account as NPA.

¶65

29. The provision of the guidelines providing for some specific internal channel for settling the doubt

¶66

12 SA/193/2025 THE KHALSA NIRBHAI TRANSPORT COMPANY PVT. LTD. VS. CATHOLIC SYRIAN BANK LIMITED AND OTHERS

¶67

in asset classification is akin to the requirement of the principals of natural justice, which according to the Supreme Court in Smt. Menka Gandhi Vs. Union of India (AIR 1978 SC 597) , must be read and followed even if, the provision is silent to that regard. The respondent being a Public Sector Bank are expected to follow the just, fair/prescribed procedure to meet the requirement of law and Article 14 of the Constitution of India.”

¶68

(12) Admittedly, applicant was not informed before classifying their accounts as NPA and no opportunity of settlement of the controversy/doubts regarding classification of the assets were given. Therefore, the accounts of NPA classification cannot be said to be justified in light of above case law cited by learned counsel for applicant.

¶69

(13) In the instant case the respondent Nos.1 & 2 have not placed on record any evidence where the accounts of the borrower were classified by the Manager of the respondent Nos. 1 & 2 as sub-standard, doubtful or loss asset. Therefore, in my opinion it cannot be said that the accounts of the applicant were classified as NPA legally in light of above case law cited by learned counsel for applicant.

¶70

(14) Sh. Diwan Sharma, Advocate further argued that there is no security agreement was executed by the applicant as per Section 2(zb) of the Act and therefore, subject property is not the secured asset as per Section 2(zc) of the Act. It was further argued that in light of above, respondent Nos. 1 & 2 cannot claim to be the secured creditor as per Section 2(zd) of the Act and there is no valid mortgage of the subject property because there was no title deed of the property which could be mortgaged, only a sale certificate of the property issued by custodian of Evacuee Property was deposited by the applicant and property was already given on lease to other company, so the requirement for creation of equitable mortgage were not fulfilled. Hence, the mortgage was invalid as per Section 2(zf)(i) and therefore, the subject property cannot be enforced and entire action initiated by the respondent Nos. 1 & 2 qua the applicant and the subject property under the

¶71

13 SA/193/2025 THE KHALSA NIRBHAI TRANSPORT COMPANY PVT. LTD. VS. CATHOLIC SYRIAN BANK LIMITED AND OTHERS

¶72

provisions of the Act is a gross abuse of law and gross violation of the provisions of Act.

¶73

(15) In the present case in hand respondent Nos. 1 & 2 alleges that the property in question was mortgaged with them but if, there was no title conferred upon the applicant company without the registration of sale deed then how the alleged title documents were accepted by the respondents. This shows that there is something black in the bottom.

¶74

(16) Sh. Diwan Sharma, Advocate further argued that respondent Nos. 1 & 2 had issued notice under Section 13(2) of the Act dated 15.09.2022 and applicant had raised certain objections under Section 13(3-A) of the Act dated 12.11.2022 (Annexure A-8) and the said objections were rejected by the Authorized Officer of the respondent Nos. 1 & 2 vide letter dated 23.11.2022 on evasive grounds and without application of due judicious mind.

¶75

(17) It was stated in the reply by respondent Nos. 1 & 2 that applicant had raised certain objections under Section 13(3-A) of the Act dated 12.11.2022 and respondent Nos. 1 & 2 had duly replied to the said objections vide letter dated 23.11.2022 (Annexure R- 12).

¶76

(18) Copy of objections moved by applicant dated 12.11.2022 is annexed as Annexure A-8 and reply to the said objections filed by respondent Nos. 1 & 2 is annexed as Annexure R-12, which shows that the Authorised Officer had replied to the said objections without application of mind and in a mechanical manner. It was only mentioned that the objections are false and wrong without any basis hence the same is rejected. Therefore, it appears that respondent Nos. 1 & 2 had not replied to the objections under Section 13(3-A) of the Act raised by applicant.

¶77

(19) Sh. Diwan Sharma, Advocate further argued that possession notice dated 31.03.2023 under Section 13(4) of the Act issued by respondent Nos.1 & 2 has not been served upon applicant as per Rule 8 of the Rules. It was further argued that the said notice was neither published in leading newspapers nor it was served through electronic mode.

¶78

14 SA/193/2025

¶79

THE KHALSA NIRBHAI TRANSPORT COMPANY PVT. LTD. VS. CATHOLIC SYRIAN BANK LIMITED AND OTHERS

¶80

(20) It was stated in the reply that possession notice dated 31.03.2023 (Annexure R-13 (Colly)) was issued and served strictly in accordance with law. It was further stated that possession notice was also pasted on the secured asset and the said notice was also published in two leading newspapers. Copies of the same are annexed as Annexure R-13(Colly).

¶81

(21) Possession notice was required to be served through personal service, through pasting and through publication in two leading newspapers. It is also required that possession notice be also served through electronic mode of service in addition to the modes prescribed under sub-rule (1) and sub-rule (2) of Rule 8 of the Rules.

¶82

(22) Respondent Nos.1 & 2 had not disclosed regarding service of possession notice through electronic mode in the pleadings. Photographs of pasting (Annexure R-13 (Colly) shows that a photocopy of one notice has been affixed on the large glass and one person is standing beside the said glass. Date and description of the notice is not clear as well as it is not clear that the said glass is conspicuous place of property in question. (23) It reveals from record that only receipts of registered post were annexed but no tracking reports were annexed along with possession notice. Therefore, it cannot be ascertained that possession notice was served upon applicant or not. Track consignment record is available w.e.f. January, 2013 and as per reply filed by respondent notice in question was sent in year 2023. Gone are the days when sending of registered post itself used to be enough for drawing the presumption of service against the addressee. There is hardly any scope for the same in view of the availability of the track consignment record. Track consignment record should have been produced to bring home the fact that the notice was duly served upon the applicant and concerned and that not being the position, this Tribunal refuses to draw presumption of service.

¶83

(24) In light of above factual position, it is established that notice under Section 13(4) of the Act was issued but not proved served upon applicant either through personal service or through pasting or through electronic mode in light of the Rules.

¶84

15 SA/193/2025

¶85

THE KHALSA NIRBHAI TRANSPORT COMPANY PVT. LTD. VS. CATHOLIC SYRIAN BANK LIMITED AND OTHERS

¶86

(25) Sh. Diwan Sharma, Advocate further argued that order dated 30.10.2023 (Annexure A-13) was passed by Chief Judicial Magistrate, Ludhiana under Section 14 of the Act without recording the satisfaction of the 09-point affidavit filed by the Authorised Officer. It was further argued that the order dated 30.10.2023 was passed in a very casual and mechanical manner as the objections raised by the borrowers and guarantors were not entertained on the ground that under Section 14 of the Act, the District Magistrate/Metropolitan Magistrate would not involve in any process of adjudication of any intense right of the parties while examining the application under Section 14 of Act. Therefore, the said order is liable to be set aside.

¶87

(26) It was stated in the reply that order dated 30.10.2023 was passed by Chief Judicial Magistrate, Ludhiana with due application of mind and after verifying the contents of the application as well as affidavit filed along with the application under Section 14 of the Act by respondent Nos.1 & 2 and there is no illegality in it. (27) Copy of application under Section 14 of the Act dated 27.09.2023, which was moved before the Chief Judicial Magistrate, Ludhiana by respondent Nos.1 & 2 is annexed as Annexure A-11 and copy of order dated 30.10.2023 passed by Chief Judicial Magistrate, Ludhiana is annexed as Annexure A-13 with the SA. (28) It is correct that Chief Judicial Magistrate has not recorded its satisfaction while passing impugned order regarding the facts stated in the application and deposed in the 09-point affidavit. Chief Judicial Magistrate had only narrated the facts mentioned in the application and recorded its order without mentioning any reason to reach on the conclusion. It is established law that any order without assigning any reason is no order in the eyes of law.

¶88

(29) It was stated in the reply that earlier applicant had filed SA No.304/2023 challenging the notice under Section 13(2) of the Act, symbolic possession notice dated 31.03.2023, order dated 30.10.2023 and as stated above, due to settlement of the loan accounts under OTS Scheme the above said SA was dismissed as infructuous vide order dated 02.04.2024 and the said order has attained finality. It was further stated that Sh. Harpreet

¶89

16 SA/193/2025 THE KHALSA NIRBHAI TRANSPORT COMPANY PVT. LTD. VS. CATHOLIC SYRIAN BANK LIMITED AND OTHERS

¶90

Singh was Director of the applicant Company as well as M/s Preet Builders Pvt. Ltd., therefore it may be assumed that applicant company was party of the OTS and the same was arrived with the consent of applicant company. However, Sh. Diwan Sharma, Advocate has denied the fact that applicant company had any consent of the said OTS.

¶91

(30) Per contra , Sh. Diwan Sharma, Advocate argued that it is correct that earlier SA No. 304/2023 was filed and the same was dismissed as infructuous as there was a settlement between the parties but applicant was not a party in the said OTS. Therefore, it is incorrect to say that applicant had filed the SA earlier with same set of facts.

¶92

(31) It is admitted by both the parties that principal borrower i.e., M/s Preet Builders Pvt. Ltd., and respondents have arrived with the OTS. If OTS was accepted without any consent of the applicant company then in light of Section 135 of the Indian Contract Act, 1872, applicant company was discharged from their liabilities.

¶93

(32) Section 135 of the Indian Contract Act, 1872 deals with the discharge of surety’s liabilities when the creditor makes a Contract with the principal debtor that alters the original terms of the contract without the surety’s consent and in the case, surety is discharged from their liabilities unless the surety has assented to such a Contract.

¶94

(33) Sh. Diwan Sharma, Advocate placed reliance upon the judgment Ramswaroop Vs. State Bank of Bikaner and Jaipur 2002 (3) WLN 430 in which it was held that surety is discharged if creditor settles or grant time to principal debtors without surety’s consent.

¶95

(34) One person may have more than one status. No such record was placed before Tribunal that applicant company was party in the OTS. It was required for the respondents to place on record the documents, which can show that Sh. Harpreet Singh has signed the OTS proposal on behalf of applicant company.

¶96

(35) No other point was argued/pressed.

¶97

(36) After considering all facts, circumstances as well as after perusal of record and as discussed above, it clearly shows that accounts of applicant were classified

¶98

¶99

SA/193/2025

¶100

THE KHALSA NIRBHAI TRANSPORT COMPANY PVT. LTD. VS. CATHOLIC SYRIAN BANK LIMITED AND OTHERS

¶101

as NPA illegally and service of notice under Section 13(4) of the Act was also not proved served.

¶102

(37) Therefore, all proceedings initiated by the respondent Nos.1 & 2 under the Act are hereby quashed and SA is allowed. It is made clear that respondent Nos.1 & 2 may initiate fresh proceedings under the Act as per law.

¶103

Record be consigned to record room after due compliance.

¶104

Date: 20.01.2026

¶105

Pronounced by me in the open Tribunal.

¶106

(MRIDULESH KUMAR SINGH) Presiding Officer, DRT-III, Chandigarh

The Khalsa Nirbhai Transport Company Pvt. Ltd. v. Catholic Syrian Bank Limited and Others

Case brief

What is this about?

What did the court decide?

The Khalsa Nirbhai Transport Company Pvt. Ltd. v. Catholic Syrian Bank Limited and Others

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

Parties & counsel

Coram

Case details

Similar cases

State Bank of India versus Sh. Rajinder Singh

State Bank of India versus M/S Poonam International and Another

State Bank of India versus M/S Adil Bakery and Another

State Bank of India versus M/S Bhole Nath Trading Co. and Others

Canara Bank versus Messrs Sampanna Creations and Another

Kotak Mahindra Bank Limited versus Sh. Mela Ram and Others