Applicant challenged SARFAESI action alleging NPA classification errors, defective notice service, and non-registration of charge. Tribunal found no illegality in proceedings, noting proper service of notices and registration of charge, and dismissed the application.
The Securitization Application was dismissed; no relief granted to the applicant.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
DEBTS RECOVERY TRIBUNAL-III, CHANDIGARH
PRESIDED OVER: SH. MRIDULESH KUMAR SINGH
SECURITIZATION APPLICATION NO.206/2024
Date of Institution: 05.06.2024 Date of Decision: 16.03.2026
M/s Rattan Industries, through its proprietor Mr. Randhir Singh, Rattanheri Badla Road, near Sangum Udyog, Village Rattanheri, District Khanna, Punjab - 141401
--Applicant Versus
The Authorised Officer, HDFC Bank Ltd, having its Registered Office at HDFC Bank House, Senapati Bapat Marg, Lower Parel (West) Mumbai – 400013
--Respondent
Argued by: Ms. Ravisha, Advocate for Applicant Sh. Amit Rishi, Advocate for Respondent
FINAL ORDER
(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 set aside demand notice under Section 13(2) of the Act dated 07.02.2022 (Annexure A-2), possession notice dated 18.05.2022 (Annexure A-4), order dated 24.04.2024 (Annexure A-5) passed by Additional District Magistrate, Khanna, District Ludhiana.
(2) It was stated in the application that applicant Firm is in the business of Steel and registered as an MSME concern; that applicant had initially availed a Working Capital Term Loan (WCTL) of Rs. 01 Crore against the mortgage of property in the name of M/s Rattan Industries; that after availing the loan facility the applicant had been maintaining the financial discipline but owing to the stringent market conditions having been faced by the Steel Industry, business of the applicant was tremendously effected; that despite serious constraints the applicant always maintained financial discipline but the respondent had from the
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very beginning an eye on the mortgaged property of the applicant being a prime commercial property; that thereafter, in the year 2020 lockdown was imposed upon the entire country due to the spread of COVID-19 Pandemic and applicant requested the bank to extend the benefit of moratorium to the applicant in terms of RBI Circulars dated 27.03.2020, 23.05.2020 and 06.08.2020 but respondent denied the request of applicant; that applicant despite making regular payments and following properly financial discipline goes granted an another WCTL (GECL) Facility of Rs. 20,10,000/-, which was never demanded by the applicant and the respondent of its own granted the said facility and adjusted the same towards the interest, thereby slipping the account of the applicant into the category of NPA, which was otherwise a standard account; that no approval from the applicant was sought before advancing the said GECL limit of Rs. 20,10,000/- rather the applicant was shocked when the said facility was advanced without his prior approval and without obtaining any signatures of the applicant on the loan papers; that loan account of the applicant was classified as NPA on 06.09.2021 without any information given to applicant and served the applicant with a notice under Section 13(2) of the Act dated 07.02.2022 claiming an amount of Rs.1,15,12,686/- in Cash Credit Facility and Rs.21,52,350/- in the GECL against the Credit Facility of Rs. 1,20,10,000/- granted to the applicant; that on 16.03.2022 applicant approached the respondent to deposit the overdue amount but respondent had refused to accept the same and informed that respondent has initiated SARFAESI action against applicant and applicant would be shortly receiving notice under Section 13(4) of the Act; that applicant was flabbergasted to receive notice dated 04.05.2022, whereby applicant was informed that the possession of the secured asset will be taken on 18.05.2022 without serving upon the applicant any notice under Section 13(4) of the Act; that possession notice dated 18.05.2022 was issued i.e., much after the notice dated 04.05.2022, which shows the intention of the respondent to illegally dispossess the applicant from its valuable property; that possession notice under
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Section 13(4) of the Act was neither served personally upon applicant nor pasted on the mortgaged property and never published in the newspapers as per Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as ‘Rules’ for brevity); that thereafter, applicant was astounded to receive order dated 24.04.2024, whereby the applicant has came to know that the physical possession of the mortgaged property has been ordered by the Additional District Magistrate, Khanna, District Ludhiana under Section 14 of the Act and the Tehsildar Khanna has been directed to take physical possession of the mortgage property as per provisions of the Act; that the secured asset was not registered by respondent with the Central Registry as per Section 26-D of the Act; that therefore, applicant had preferred the instant SA before this Tribunal against the illegal action of the respondent as the respondent has threatened the applicant taking the physical possession of the mortgaged property of the applicant any time soon. Therefore, it was prayed that the present SA may kindly be allowed.
Reply filed by respondent.
(3) Reply filed by respondent. (4) It was stated in the reply that the present application is bereft of any merits; that applicant has not approached this Tribunal with clean hands and has concealed material information in order to mislead this Hon’ble Tribunal; that applicant did not make repayments in terms of the agreed contracts/ agreements; that accordingly the account of applicant has been classified as NPA on 06.09.2021 as per the guidelines issued by Reserve Bank of India; that applicant had availed/sanctioned Cash Credit Facility of Rs. 100 Lacs vide sanction letter dated 23.08.2016 and GECL-WCTL Facility of Rs. 20.10 Lacs vide sanction letter dated 12.06.2020; that applicant had failed to maintain financial discipline in the loan accounts, therefore the loan accounts of the applicant were classified as NPA by way of implication of the prudential norms fixed by RBI; that thereafter, respondent has issued notice under Section 13(2) of the Act dated 07.02.2022 (Annexure R-3) (Annexure A-2 in the present SA duly admitted as received), wherein the demand was raised to liquidate the entire amount
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outstanding within 60 days along with interest applicable as on 04.02.2022; that respondent had not received any reply/objections to the notice under Section 13(2) of the Act; that thereafter, respondent had issued notice under Section 13(4) of the Act dated 18.05.2022; that copy of the said notice along with photographs of affixation at the secured asset & publication in two newspapers are annexed as Annexure R-4; that subsequently, Additional District Magistrate, Khanna, District Ludhiana had passed the order dated 19.04.2024 for obtaining physical possession of the secured asset (Annexure R-5); that on 15.07.2024 the Tehsildar-cum-Duty/Executive Magistrate (Naib Tehsildar) Khanna, Ludhiana had issued the impugned letter for taking physical possession of the mortgaged property on 28.08.2024 tactically admitted to be received; that physical possession of the secured asset is still with the borrower as on date; that as on 20.08.2024, total sum of Rs. 2,27,84,153.51p was outstanding in the said loan account; that the grounds raised in the present application are vague, false and frivolous; that applicant has miserably failed to show that there has been any violation of the provisions of the Act; that applicant is not entitled to any relief under equity or under the discretions of the Tribunal. Therefore, it was prayed that the present SA may kindly be dismissed.
(5) No replication was filed by applicant to the reply filed by respondent.
(6) I have heard arguments advanced by Ms. Ravisha, Advocate for Applicant and Sh. Amit Rishi, Advocate for Respondent and gone through the record carefully.
(7) Ms. Ravisha, Advocate argued that respondent has wrongly classified the accounts of applicant as NPA on 06.09.2021 and no intimation was given by respondent regarding the classification of loan account as NPA.
(8) Per contra , Sh. Amit Rishi, Advocate argued that the accounts of applicant were classified as NPA in strict compliance of Rules and there is no illegality in it. It was further argued that there is no requirement under any law to issue advance notice to borrowers and
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guarantors regarding the classification of accounts as NPA.
(9) Ms. Ravisha, Advocate could not explained as to how loan accounts were wrongly classified as NPA. There is nothing on record, which can show that loan accounts can be classified as NPA only after continuous default of 90 days. In the considered opinion of this Tribunal, if borrower defaults in payment of three installments on due dates and whenever there is default of total 90 days then secured creditor is entitled to classify the loan account as NPA, if there is no legal impediment. In the considered opinion of this Tribunal, there was no legal necessity to issue advance notice to applicant before classification of its accounts as NPA. (10) Ms. Ravisha, Advocate further argued that unit of the applicant is MSME Unit and as per Circular Letters and Guidelines issued by Reserve Bank of India, matter was not referred to Designated Committee by respondent before classifying the account as NPA, therefore classification of loan accounts as NPA is illegal.
(11) Per contra , Sh. Amit Rishi, Advocate argued that no Udhyam Certificate or any application to refer the matter before Designated Committee was provided to bank, therefore it is not proved that unit of applicant is MSME Unit and in light of above, there was no necessity to refer the matter of applicant to Designated Committee before classification of accounts as NPA.
(12) No copy of Udhyam Registration Certificate was filed by applicants. No copy of Sanction Letter is on record to ascertain that the loan was granted to MSME Unit or not. Therefore, it cannot be inferred that the said loan facility was granted to MSME Unit. Therefore, there was hardly any requirement to refer the matter to Designated Committee before classification of loan accounts as NPA.
(13) Since no information was provided to respondent regarding MSME Unit by applicant is proved, therefore there was no necessity and obligation upon respondent for referring the matter to Designated Committee before classification of NPA. No replication to reply was filed by applicant to show that the
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SA/206/2024 M/S RATTAN INDUSTRIES VS. HDFC BANK LIMITED
document was provided to respondent at the time of sanction of loan.
(14) It was not argued by Ms. Ravisha, Advocate that notice under Section 13(2) of the Act dated 07.02.2022 was not served upon applicant rather it was mentioned in the SA as well as admitted during the course of arguments that the said notice was received by applicant. Therefore, adjudication on the notice under Section 13(2) of the Act is not required.
(15) Ms. Ravisha, Advocate further argued that possession notice under Section 13(4) of the Act dated 18.05.2022 was neither served personally nor it was affixed or published in the two leading newspapers as per Rules.
(16) Per contra , Amit Rishi, Advocate argued that possession notice under Section 13(4) of the Act dated 18.05.2022 was duly served upon applicant per Rules. It was further argued that copy of said notice along with copy of affixation as well as copies of publications are annexed as Annexure R-4 to the reply.
(17) It reveals from record that notice under Section 13(4) of the Act was issued and sent on the same address as was mentioned in the notice under Section 13(2) of the Act. It was admitted fact that notice under Section 13(2) of the Act was served upon applicant then it may be safely presumed that the notice under Section 13(4) of the Act was also received by applicant. Notice under Section 13(4) of the Act Annexure A-4 was attached by applicant. Neither it was mentioned in the SA nor it was argued during the course of arguments that as to from where applicant has procured this possession notice. It further reveals from record that the said notice was also affixed on the conspicuous part of the secured asset (Annexure R4) and the same was also duly published in the two leading newspapers i.e., Indian Express and in Vernacular on 21.05.2022 (Annexure R4). This shows that the possession notice was served on the persons concerned as per Rules.
(18) Ms. Ravisha, Advocate further argued that respondent had never created its charge against the property in question with CERSAI as per Section 26-D of the Act.
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(19) Per contra , Sh. Amit Rishi, Advocate argued that respondent had duly created its charge against the property in question with CERSAI and copies of CERSAI Certificates are annexed as Annexures R7 to R9 to the reply.
(20) In the considered opinion of this Tribunal, as per CERSAI Certificates, the secured asset is duly registered with Central Registry as per Section 26-D of the Act.
(21) Ms. Ravisha, Advocate further argued that applicant is ready to deposit the outstanding amount with the respondent.
(22) Applicant may deposit the amount as per wish. (23) No other point was argued/pressed. (24) After the consideration of all facts, circumstances as well as after perusal of record, no illegality or irregularity was indicated by applicant in the proceedings initiated by respondent under the Act and no case is made out by applicant in its favour. (25) Therefore, SA is dismissed.
Record be consigned to record room after due compliance. Date: 16.03.2026 Pronounced by me in the open Tribunal. (MRIDULESH KUMAR SINGH) Presiding Officer, DRT-III, Chandigarh
3 issues framed by the court
Whether the applicant established illegality in the classification of loan account as NPA or the refusal to grant moratorium.
Whether the notice under Section 13(4) of the SARFAESI Act was properly served, affixed, and published as per the Rules.
Whether the secured asset was duly registered with the Central Registry under Section 26-D of the Act.
5 provisions across 1 enactments
M/s Rattan Industries
HDFC Bank Ltd
Mridulesh Kumar Singh
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
