Dismissed

M/S Shiv Trading Co. and Another v. Uco Bank and Another

DRT16 Mar 2026SA/233/2024

Case brief

AI extract

What is this about?

Debts Recovery Tribunal dismissed a securitization application filed by borrowers challenging a bank's possession notice and e-auction under the SARFAESI Act. The court held no illegality was established and the claim regarding non-joinder of the guarantor was rejected.

What did the court decide?

Securitization Application dismissed; other pending IAs disposed of accordingly.

M/S Shiv Trading Co. and Another versus Uco Bank… — Contract and Commercial Disputes | DRT (2026)

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DEBTS RECOVERY TRIBUNAL-III, CHANDIGARH

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PRESIDED OVER: SH. MRIDULESH KUMAR SINGH

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SECURITIZATION APPLICATION NO.233/2024

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Date of Institution: 02.07.2024 Date of Decision: 16.03.2026

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M/s Shiv Trading Company through its Proprietor Sh. Niwas Shukla S/o Sh. Shiv Prasad Shukla, R/o House No. B-31-38853, Street No. ¼ Plot No. 108, Banda Bahadur Colony, Near Tikona Park, New Shubhash Nagar, Basti Jodhewal Ludhiana, Punjab-141007

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Sh. Niwas Shukla, Proprietor of M/s Shiv Trading Company, R/o H.No. B-31-38853, Street No. ¼ Plot No. 108, Banda Bahadur Colony, Near Tikona Park, New Shubhash Nagar, Basti Jodhewal Ludhiana, Punjab-141007

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--Applicants

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Versus

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The Authorised Officer, UCO Bank, Manghat, Rahon Road, Basti Jodhewal, Ludhiana-141007

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--Respondent

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Argued by: Sh. Vishal Sodhi, Advocate for Applicants Sh. Sumit Narang, Advocate for Respondent

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FINAL ORDER

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(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 action of the respondent in taking over the constructive, symbolic or actual possession or to e-auction the property on 10.07.2024 vide notice dated 05.06.2024 and further action in taking over the possession of the secured asset of the applicants.

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(2) It was stated in the application that applicant No.1 M/s Shiv Trading Company is Proprietor concern and applicant No.2 is the sole proprietor of his Firm; that applicant Firm deals in the manufacturing and trading of hosiery garments in Ludhiana; that applicant No.1 is an MSME Unit; that in the year 2019, applicant

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2 SA/233/2024

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M/S SHIV TRADING COMPANY AND ANOTHER VS. UCO BANK

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No.2 approached respondent for availing loan facility and respondent had sanctioned Cash Credit Limit of Rs.13,80,000/-, which was further enhanced by providing more financial help under the different accounts by the respondent; that at the time of taking loan, various signed documents in blank papers were obtained by respondent and no document of loan agreement etc. were provided to the applicants; that for availing the above said facility, applicants had mortgaged the property i.e., House measuring 50 sq. yards vide registered sale deed dated 25.05.2017 situated at Village Kulyewal Hadbast No. 178 (Abadi Baba Banda Singh Bahadur Colony), Tehsil and District Ludhiana as a secured asset; that applicants complied with all the terms and conditions of the loan agreement and duly maintained their loan account and there was no such difficulty as their business was also running well; that due to Covid-19 Pandemic period, the entire hosiery industry in Ludhiana remained affected due to continuous lockdown of the entire country and shutting down of hosiery business; that under these circumstances, applicants could not repay the loan amount; that respondent without intimating the applicants about the classification of loan account as NPA, issued notice under Section 13(2) of the Act dated 23.08.2023 calling upon applicants to pay back its entire liability of total outstanding of Rs.17,21,097/within 60 days, otherwise the process will be initiated to take over the possession of secured asset against the applicants; that applicant No.2 immediately met the respondent and requested them to stall the proceedings for recovery by granting some breathing time so that they would revive its business; that applicant No.2 also requested to enhance their Term Loan but no such sympathy was shown by respondent; that even applicants also demanded the scheme for settlement of their account under OTS Scheme or rescheduling of overdue amount by regularizing the loan account but the respondent was adamant not to do so or to grant any such relief to applicants; that no notice under Section 13(2) of the Act was issued to all the applicants, therefore no such opportunity to make representation was provided to applicants under

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SA/233/2024

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M/S SHIV TRADING COMPANY AND ANOTHER VS. UCO BANK

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Section 13(3-A) of the Act; that thereafter, respondent had issued possession notice dated 15.12.2023 under Section 13(4) of the Act wrongly and illegally; that the said possession notice was also not published in the leading newspapers having sufficient circulation in the locality; that thereafter, respondent has also approached, District Magistrate, Ludhiana for obtaining the order for taking over the actual physical possession under Section 14 of the Act; that applicants have received summons from the Court of Deputy Commissioner-cum-Additional District Magistrate, Ludhiana dated 03.04.2024 for appearance on 11.06.2024; that summons dated 03.04.2024 issued by District Magistrate, Ludhiana were received then applicants came to know about the initiation of action of the bank; that thereafter, respondent has put the property on sale under Rule 8(5) of the Rules by calling the bids by way of e-auction notice by publish the same in the newspapers for the sale of secured asset in the auction, which is to be scheduled for 10.07.2024 at a reserve price of Rs.21,72,000/-; that the said sale notice was not served upon applicants providing 30 days time; that respondent has cleverly issued and served notice of e-auction dated 05.06.2024 upon the Guarantor i.e., Pinki Shukla at Gonda, UP address and the same notice was too received on 11.06.2024 as per the tracking report of speed post made by respondent; that reserve price of the property was also fixed on lesser side unilaterally without any proper valuation report. Therefore, it was prayed that the present SA may kindly be allowed.

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(3) Reply filed by respondent.

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(4) It was stated in the reply that the sole motive of the applicants herein is to thwart the lawful action of the bank, which is duty bound under the Act to recover the pious public money from the clutches of a defaulter like the applicants; that despite defaulting in making payment of instalments, applicants approached this Tribunal by filing present SA, just to frustrate/obstruct the process of the bank initiated under the Act; that no case is made out by the applicants in the entire SA in their favour; that applicant No.2 approached respondent for availing certain credit facilities for its

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4 SA/233/2024 M/S SHIV TRADING COMPANY AND ANOTHER VS. UCO BANK

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business of manufacturing of hosiery goods; that respondent has sanctioned credit facilities i.e., Cash Credit Limit to the tune of Rs.8 Lacs, Term Loan (GECL) of Rs.2,59,000/-, Working Capital Term Loan of Rs.5,80,000/- and Term Loan (GECL) of Rs.1,29,000/total to the tune of Rs.17,68,000/-; that to secure the above said credit facilities, applicants had hypothecated stocks and book debts as primary security and by mortgaging immovable property i.e., House measuring 50 sq. yards situated at Village Kulyewal, Hadbast No.178, Tehsil & District Ludhiana owned by Smt. Pinki Shukla vide sale deed dated 25.05.2017 as collateral security; that Smt. Pinki Shukla stood as a guarantor for repayment of the dues under or in respect of the said credit facilities extended in favour of the borrowers by respondent; that the said loan facilities had been running irregular and when the borrowers failed to regularize them despite number of reminders the same were classified as NPA on 29.07.2023; that thereafter, respondent had issued and served notice under Section 13(2) of the Act dated 23.08.2023 upon borrowers through its proprietor and the guarantor called upon them to repay the total outstanding amount i.e., Rs.17,21,097/- within 60 days from the date of receipt of the notice but applicants had never filed any objections to the said notice under Section 13(3-A) of the Act; that thereafter, respondent had issued possession notice under Section 13(4) of the Act dated 15.12.2023 and the said notice was duly published in the newspapers, which is annexed as Annexure R-1/7 (Colly) and also through other modes provided under the Rules; that thereafter, respondent applied for permission of the District Magistrate, Ludhiana as required under Section 14 of the Act for obtaining order for physical possession of the property; that pursuant to obtaining symbolic possession of the secured asset, respondent had put the said secured asset on public auction vide public notice for e-auction of the sale of movable/immovable properties under the Act dated 04.06.2024; that said auction was failed as no bid was received by respondent; that the present application is bad for non-joinder of necessary party since the guarantor i.e., Smt. Pinki Shukla W/o Sh. Niwas Shukla

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5 SA/233/2024 M/S SHIV TRADING COMPANY AND ANOTHER VS. UCO BANK

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has not been made a party in the present application before this Tribunal, therefore the present application deserves to be dismissed.

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(5) No replication filed by applicants to the reply filed by respondent.

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(6) I have heard arguments advanced by Sh. Vishal Sodhi, Advocate for Applicants and Sh. Sumit Narang, Advocate for Respondent and gone through the record carefully.

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(7) Sh. Vishal Sodhi, Advocate argued that respondent had wrongly classified the accounts of applicants as NPA on 29.07.2023 because there was no 90 days default in continuation as per RBI Circular. It was further argued that respondent has not issued any prior notice regarding classification of accounts as NPA therefore, the SARFAESI proceedings are illegal.

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(8) Per contra , Sh. Sumit Narang, Advocate argued that the accounts of applicants were classified as NPA in strict compliance of Rules and there is no illegality in it. It was further argued that that there is no requirement under any law to issue advance notice to borrowers and guarantors regarding the classification of account as NPA.

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(9) Sh. Vishal Sodhi, 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 borrowers 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 accounts as NPA, if there is no legal impediment.

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(10) In light of above, there is no illegality in the classification of loan accounts as NPA.

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(11) Sh. Vishal Sodhi, Advocate further argued that notice under Section 13(2) of the Act dated 23.08.2023 was not issued to all the applicants. Therefore, applicants were unable to raise objections under Section 13(3-A) of the Act.

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(12) Per Contra , Sh. Sumit Narang, Advocate argued that notice under Section 13(2) of the Act dated 23.08.2023 was duly served upon applicants as per

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6 SA/233/2024 M/S SHIV TRADING COMPANY AND ANOTHER VS. UCO BANK

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Rules. It was further argued that copy of the said notice along with receipts of registered posts were annexed as Annexure R-1/6 to the reply.

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(13) It reveals from the copy of notice under Section 13(2) of the Act dated 23.08.2023 along with receipts of registered posts were annexed as Annexure R-1/6 to the reply that the said notice was duly sent to borrowers, mortgagors as well as to guarantors. Therefore, it is incorrect to say that the said notice was not issued to all the applicants. It was not argued that the notice under Section 13(2) of the Act was not served to applicants. Therefore, there is no need regarding adjudication of the service of notice under Section 13(2) of the Act.

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(14) Sh. Vishal Sodhi, Advocate further argued that notice under Section 13(4) of the Act dated 15.12.2023 was not published in the two leading newspapers as per Rules.

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(15) Per Contra , Sh. Sumit Narang, Advocate argued that notice under Section 13(4) of the Act dated 15.12.2023 was duly served upon applicants as per Rules. It was further argued that the said notice was duly published in two leading newspapers i.e., one in Indian Express (English) and Daily Chardikala (Vernacular) and copies of the same are annexed as Annexure R-1/7 (Colly). (16) It was not argued by learned counsel for applicants that the said notice was not served upon applicants through registered post or through affixation, therefore there is no requirement to adjudicate to issue on this point. (17) It reveals from the copies of newspapers i.e., Indian Express (English) and Daily Chardikala (Vernacular) annexed along with the reply as Annexure R-1/7 (Colly) that the said possession notice was duly published as per Rules and there is no illegality in it. (18) Sh. Vishal Sodhi, Advocate further argued that sale notice dated 05.06.2024, whereby auction of the secured asset was fixed for 10.07.2024 was not served upon applicants as per Rules.

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(19) Per contra , Sh. Sumit Narang, Advocate argued that sale notice dated 05.06.2024 challenged by the applicants in the present SA has been rendered

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7 SA/233/2024 M/S SHIV TRADING COMPANY AND ANOTHER VS. UCO BANK

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infructuous for the reason that sale scheduled for 10.07.2024 in the term of the said notice was failed as no bid was received for that auction sale.

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(20) In light of above, there is no need to prove the service of above said sale notice challenged by the applicants in the present SA. Neither it required for any adjudication.

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(21) Sh. Vishal Sodhi, Advocate further argued that applicants had sent a proposal under OTS for settlement but respondent was adamant not to do so or to grant any such relief to applicants. It was further argued that applicants are still ready to settle their matter with respondent but despite of readiness of applicants, respondent is not ready for the settlement/OTS.

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(22) Per contra , Sh. Sumit Narang, Advocate argued that since OTS proposal was on the very lower side in comparison to the outstanding dues, authorities of respondent had not found it worth acceptable and the same was rejected.

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(23) Settlement of any loan account under OTS or otherwise is the sole prerogative of secured creditor i.e., Bank/FI. Any borrower has no right to compel the secured creditor to settle the loan account under OTS or otherwise.

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(24) During my day-to-day work in the Tribunal, it has came in the knowledge that every second borrower wants for settlement under OTS and not for deposit of total outstanding amount. Since Banks/FIs accepts the OTS proposals at very low amount in comparison to the total outstanding amount in most of the cases, this ailment is growing on day by day.

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(25) As per established law this Tribunal has no authority for issuance of directions to Banks/FI for settlement of loan accounts of borrowers.

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(26) In the Act nowhere, it is provided that on the ground of non-settlement of loan under OTS by secured creditor this Tribunal can set aside the SARFAESI proceedings. In fact, it is settled law that any borrower cannot claim as a right that OTS proposal submitted by him/her/it must be accepted by the Bank/FI.

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(27) Sh. Sumit Narang, Advocate argued that present SA is bad for non-joinder of necessary party

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8 SA/233/2024 M/S SHIV TRADING COMPANY AND ANOTHER VS. UCO BANK

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i.e., Smt. Pinki Shukla W/o Sh. Niwas Shukla, who is the guarantor in the credit facilities availed by applicants. Therefore, the present SA is liable to be dismissed on this score only.

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(28) It was admitted by Sh. Vishal Sodhi, Advocate that Smt. Pinki Shukla was a guarantor for the credit facilities availed by applicants but it was denied that Smt. Pinki Shukla is necessary and proper party in the present SA.

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(29) After due consideration, this Tribunal is of the opinion that each and every borrower, mortgagor and guarantor is not required to file jointly an SA challenging the SARFAESI proceedings.

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(30) After considering the above facts, it is clear that the present SA is not barred by non-joinder of necessary party.

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(31) No other point was argued/pressed.

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(32) After considering the above facts,

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circumstances as well as arguments and evidence on record, no case is made out by applicants in their favour. No illegality/irregularity was indicated by applicants in the proceedings initiated by respondent under the Act.

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(33) Accordingly, this SA is dismissed. Any other IA pending stands disposed of accordingly. Record be consigned to record room after due compliance.

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Date: 16.03.2026

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Pronounced by me in the open Tribunal.

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

M/S Shiv Trading Co. and Another v. Uco Bank and Another

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M/S Shiv Trading Co. and Another v. Uco Bank and Another

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