Allowed

Tanishkaa Fashion v. Canara Bank

DRT24 Mar 2026SA/585/2024

Case brief

AI extract

What is this about?

Debts Recovery Tribunal set aside SARFAESI auction proceedings and sale certificate due to the secured creditor's failure to serve notices and publish details in newspapers, and the auction purchaser's delayed deposit of the required sale amount.

What did the court decide?

Sale set aside, order quashed, Sale Certificate quashed, applicant directed to refund sale consideration with 4% interest to purchaser, and respondents directed to refund stamp duty.

Tanishkaa Fashion versus Canara Bank — Banking and Recovery | DRT (2026)

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SA No.585/2024

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Fair Order

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IN THE DEBTS RECOVERY TRIBUNAL AT MADURAI DATED THIS 24^th DAY OF MARCH, 2026 PRESENT: SEEMA SINHA [PR. DISTRICT & SESSIONS JUDGE - Retd] PRESIDING OFFICER

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SA No. 585/2024

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M/s. Tanishkaa Fashion, Rep by its Partner, No.19, Asirvatham Street, Kennet Hospital Road,

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Ellis Nagar, Madurai – 625 001.

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N.Nagendran,

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S/o. Nagarajan,

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No.G2 Varsha, Vasudhara Apartment,

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Agrini Apartment, Andapuram, Madurai. …. Applicants

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The Authorised Officer, Canara Bank, SME Branch, NO.50, VMR Complex, Bye Pass Road, Vasanth Nagar, Madurai – 625 003.

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…. 1^st Defendant Bank

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A.Anbazhagan,

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S/o. Arumugam, No.4B/B,V.O.C Street, Veeramudaiyan Main Road, Alagappan Nagar, Madurai -625 003. …. 2^nd Defendant/Auction Purchaser

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Appearance of Advocates: Mr.S.Suresh ---- Counsel for the Applicants Mr.P.Madhan Alexander ---- Counsel for the 1st Defendant Bank M/s.APG.Ohm Chairma Prabhu ---- Counsel for the 2^nd Defendant/Auction Purchaser

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Page 1 of 34

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SA No. 585/2024

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This SARFAESI Application was heard in the presence of Counsels for the Applicants, 1^st Defendant Bank & 2^nd Defendant/Auction Purchaser and fixed for passing final order before me and upon hearing the arguments of the Counsels and having stood over for consideration till this day, this Tribunal delivered the following:

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O R D E R

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1 . This Application has been filed u/s. 17 of the SARFAESI Act, 2002 by the Applicants praying that this Hon'ble Tribunal may be pleased to set aside the entire SARFAESI Proceedings initiated by the 1^st Defendant Bank ending up with the Auction Sale Notice dated 29.07.2024 issued by the Defendant and the consequential Auction Sale held on 31.08.2024 in favour of the 2^nd Defendant and the order passed by the Learned Chief Judicial Magistrate, Madurai under Section 14 of the SARFAESI Act, 2002 in Crl.M.P.No.143 of 2024 dated 01.03.2024 appointing an Advocate Commissioner for taking physical possession of the schedule mentioned properties.

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2 . The brief averments of the Application filed by the Applicants are as follows:-

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a) The Counsel for the Applicants submitted that the Application has been filed challenging the Auction Notice dated 29.07.2024, the auction sale held on 31.08.2024, and the consequential order passed by the Learned Chief Judicial Magistrate, Madurai, under Section 14 of the SARFAESI Act, 2002, in Crl.M.P. No. 143 of 2024 dated 30.08.2024, appointing an Advocate Commissioner to take physical possession of the schedule-mentioned properties offered as security for the alleged dues in respect of the loan facilities availed by the Applicants.

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b) The Applicants have been constituents of the 1^st Defendant Bank since 2015 and had availed various credit facilities, including renewals

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and enhancements of loans, up to 2019, which were duly repaid without default by regularly servicing the interest. The Applicants were regular in repayment until the onset of the COVID-19 pandemic. However, due to the COVID-19 lockdown imposed by the Government, the 1^st Applicant’s business came to a standstill, resulting in substantial losses, and consequently, the Applicants were unable to adhere to the repayment schedule of the 1^st Defendant Bank.

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c) The Applicants respectfully submit that, to their shock and surprise, the 1^st Defendant Bank classified the loan account as a NonPerforming Asset (NPA) on 29.08.2023, despite the RBI guidelines for restructuring MSME loans—applicable to loan accounts that were standard as on 01.03.2020—being in force. Hence, the classification of the loan account as an NPA during the COVID-19 lockdown period is contrary to the RBI guidelines and is therefore illegal. Consequently, the 1^st Defendant Bank has no right or jurisdiction to proceed further under the SARFAESI Act, 2002.

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d) The Applicants humbly submit that the 1^st Defendant Bank issued a Demand Notice under Section 13(2) of the Act dated 29.08.2023, claiming a sum of Rs.2,30,40,057.86p. Upon receipt of the said notice, the Applicants immediately approached the 1^st Defendant Bank and sought renewal/restructuring of the loan account. It is pertinent to point out that it was only after the COVID-19 pandemic that the Applicants were unable to adhere to the repayment schedule of the 1^st Defendant Bank; prior to this, for nearly three years, the Applicants had been prompt in repayment.

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e) The Applicants respectfully submit that it is pertinent to point out that the RBI has issued guidelines for restructuring the loan accounts of MSME units, wherever necessary, in order to support economic activity and improve the GDP of the country. The Hon’ble Supreme Court, in its recent decision in the case of M/s. Pro Knits –Vs– The

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Board of Directors of Canara Bank and batch cases, has clearly held that the "...Instructions/Directions issued by the Central Government under Section 9 of the MSMED Act and by the RBI under Section 21 and Section 35A have statutory force and are binding to all the Banking Companies." and the relevant para has also been noted in his Written Arguments.

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f) Hence, the 1^st Defendant Bank ought to have granted restructuring of the loan to the Applicants in accordance with the RBI guidelines. However, instead of granting such restructuring, the Defendant Bank classified the loan account of the Applicants as an NPA with effect from 29.08.2023. Therefore, the classification of the loan account as an NPA is contrary to the RBI guidelines and is illegal. Consequently, the 1^st Defendant Bank has no right or jurisdiction to invoke the provisions of the SARFAESI Act, 2002.

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g) The Applicants submit that, in the meantime, the 1^st Defendant Bank took possession of the property by issuing a Possession Notice under Section 13(4) of the SARFAESI Act, 2002. However, the said Possession Notice was neither affixed on a conspicuous part of the properties nor published in two leading newspapers, as mandated under the Act and the Rules.

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h) The Applicant further submits that immediately after taking Possession, the 1^st Defendant Bank issued an Auction Sale Notice fixing the reserve price as Rs.3,50,00,000/- without taking proper valuation of the properties. Subsequently, the same was reduced to Rs.3,15,60,000/- in the Auction Sale Notice dated 03.05.2024, and within a short span of 80 days, the reserve price was further reduced to Rs.2,85,00,000/- in the impugned Auction Sale Notice dated 29.07.2024, fixing the date of sale on 31.08.2024. Further, the Auction Sale Notice dated 29.07.2024 was not affixed on the conspicuous part of the properties, nor was the same properly

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published in two leading newspapers as contemplated under the Rules.

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i) The Applicants further submit that, in the meantime, the 1^st Defendant Bank filed a petition before the Learned Chief Judicial Magistrate, Madurai, in Cr.M.P. No. 143 of 2024, and the same was ordered on 01.03.2024 without notice to the Applicants, and an Advocate Commissioner was appointed for taking physical possession of the properties. The Advocate Commissioner appointed by the Learned Chief Judicial Magistrate issued a letter on 02.09.2024 fixing the date for taking physical possession of the properties on 12.09.2024. Only then the Applicants came to know about the order passed by the Learned Chief Judicial Magistrate, Madurai.

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j) It is further stated that the Applicants reliably learnt that the 1^st Defendant Bank had sold the schedule-mentioned properties to third parties for a throwaway price by violating the procedures and norms prescribed under the SARFAESI Act, 2002. The 1^st Defendant Bank had sold the property in an illegal and collusive manner and is not furnishing the details about the auction sale conducted on 31.08.2024. Aggrieved by the above action of the 1^st Defendant, the Applicants are preferring the present application among the following grounds:

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(i) The Auction Notice dated 29.07.2024 issued by the 1^st Defendant, the auction sale held on 31.08.2024, and the consequential order passed by the Learned Chief Judicial Magistrate, Madurai, under Section 14 of the SARFAESI Act, 2002, in Crl.M.P. No. 143 of 2024 dated 30.08.2024, appointing an Advocate Commissioner for taking physical possession of the schedule-mentioned properties, are arbitrary in nature, illegal, contrary to law, against the weight of evidence, and against the principles of natural justice, and are thus liable to be set aside.

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(ii) The action of the 1^st Defendant is arbitrary in nature, and they have not followed the provisions of the SARFAESI Act and the rules thereunder. The act of the Defendant Bank is illegal.

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(iii) The 1^st Defendant has not given proper entries of the various payments made by the Applicants. The interest charged by the 1^st Defendant is not in accordance with the RBI guidelines.

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(iv) The 1^st Defendant is proceeding against the Applicants in contravention of the object of the SARFAESI Act, as the classification of the Applicants’ loan account as NPA is against the RBI guidelines for the MSME sector, and the same is bad in law. Hence, the 1^st Defendant does not have any right or jurisdiction to proceed further under the SARFAESI Act, 2002.

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(v) The 1^st Defendant failed to consider the request of the Applicants for restructuring as per the RBI guidelines during the COVID-19 pandemic, which are statutory in nature and have binding force on the 1^st Defendant Bank.

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(vi) The 1^st Defendant ought to have seen that the Applicants are entitled to restructuring as per the RBI guidelines, and the classification of the loan accounts as NPA is bad in law, and the 1^st Defendant is not entitled to invoke the provisions of the SARFAESI Act, 2002.

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(vii) The 1^st Defendant ought to have seen that the 13(4) Possession Notice was not served on the Applicants, nor was the same properly published in two leading newspapers as contemplated under the Rules. Further, the Possession Notice was also not affixed on the conspicuous part of the properties.

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(viii) The 1^st Defendant ought to have seen that the Auction Sale Notice dated 29.07.2024 was not affixed on the conspicuous part of the properties, nor was the same properly published in two leading newspapers as contemplated under the Rules.

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(ix) The 1^st Defendant ought to have seen that they have not issued any notice in terms of Rule 8(6) before publishing the Auction Sale Notice dated 29.07.2024, to enable the Applicants to exercise their right of redemption under Section 13(8) of the Act. Further, the 1^st Defendant Bank had not mentioned the updated amount in the auction sale notice.

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(x) The 1^st Defendant had undervalued the property, drastically reduced the reserve price, and sold the properties to third parties for a throwaway price.

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(xi) The Learned Chief Judicial Magistrate ought to have seen that the petition filed under Section 14 of the Act does not contain full details and that the 1^st Defendant had suppressed material facts, and they have not filed any affidavit along with the petition as contemplated under the Act.

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(xii) The Learned Chief Judicial Magistrate ought to have seen that the averments about the dates of the 13(2) and 13(4) notices are contrary to the real facts. Hence, the Learned Chief Judicial Magistrate ought to have rejected the petition filed by the 1^st Defendant Bank.

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(xiii) The Learned Chief Judicial Magistrate had allowed the petition filed by the 1^st Defendant without notice to the Applicants, thereby denying them the opportunity to put forth their case, and everything was done behind their back.

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In the Written Argument, the Ld. Counsel appearing on behalf of Applicant has submitted that

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k) CLASSIFICATION OF LOAN ACCOUNT AS NON-PERFOREMING

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ASSESTS : The Applicants submit that the 1st Defendant, without considering the restructuring viability as per the MSME and RBI Circular, had classified the loan account of the Applicants as NPA. The Applicants further submit that it is pertinent to point out that the RBI issued guidelines to restructure the loan accounts of MSME units wherever necessary in order to improve the GDP of the country. The Hon’ble Supreme Court, in its recent decision in the case of M/s. Pro Knits –Vs– The Board of Directors of Canara Bank and batch cases, has clearly held that the “…Instructions/Directions issued by the Central Government under Section 9 of the MSMED Act and by the RBI under Section 21 and Section 35A have statutory force and are binding on all the banking companies.” It is further submitted that, following the above judgment of the Hon’ble Supreme Court, the Hon’ble Division Bench of the Madras High Court, vide order dated 03.06.2025 made in W.P.(MD) Nos. 23328, 21556, 22787 and 22789 of 2024 (A.K. Karthikeyan –Vs– The Authorised Officer, Canara Bank, etc .) and relevant para has also been noted in his Written Argumnet.

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l) The Applicant submits that the 1st Defendant Bank issued the loan by considering the Applicant as an MSME, and the 1st Defendant Bank Sanction Memorandum dated 30.09.2021 (Applicant Additional Typeset Page No. 14) clearly shows that the Applicant is an MSME under II. Borrower’s Profile, Serial No. 4 – Sector: Priority/MSME/Mfg/Micro Enterprises, and in (Applicant Additional Typeset Page No. 15), Serial No. 7 – Udyam Registration No. UDAM-TN-0000712, and the Sale Certificate dated 10.09.2024 (1st Defendant Typeset Page No. 113) issued by the 1st Defendant Bank clearly shows that the 1st Defendant Bank sanctioned the loan as MSME to the Applicants. In the present case on hand, the 1st Defendant Bank, instead of forming a committee, had classified the loan account of the Applicants as NPA with effect from 29.08.2023. Hence, the classification of the loan account as NPA

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is against the MSME and RBI guidelines and the same is illegal; hence, the 1st Defendant does not have any right or jurisdiction to invoke the provisions of the SARFAESI Act, 2002.

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m) RULE 8 (6) WAS NOT FOLLOWED : The Applicant respectfully submits that after the amendment brought into the SARFAESI Act in 2016, Act No. 44 of 2016 introduced certain amendments to the SARFAESI Act with effect from 01.09.2016. Significantly, Section 13(8) of the SARFAESI Act was also amended. Prior to its amendment, Section 13(8) read as under:

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“ 13(8). If the dues of the secured creditor together with all costs, charges and expenses incurred by him are tendered to the secured creditor at any time before the date fixed for sale or transfer, the secured asset shall not be sold or transferred by the secured creditor, and no further step shall be taken by him for transfer or sale of that secured asset.”

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After its amendment with effect from 01.09.2016, Section 13(8) of the SARFAESI Act presently reads as under:

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“ 13(8). Where the amount of dues of the secured creditor together with all costs, charges and expenses incurred by him is tendered to the secured creditor at any time before the date of publication of notice for public auction or inviting quotations or tender from public or private treaty for transfer by way of lease, assignment or sale of the secured assets,—

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(i) The secured assets shall not be transferred by way of lease, assignment or sale by the secured creditor; and

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(ii) In case any step has been taken by the secured creditor for transfer by way of lease or assignment or sale of the assets before tendering of such amount under this sub-section, no further step shall be taken by such secured creditor for

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transfer by way of lease or assignment or sale of such secured assets.”

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 In so far as the Rules of 2002 are concerned, amendments were made with effect from 04.11.2016 by way of G.S.R. 1046(E) dated 03.11.2016. In view of the above said amendments brought into Section 13(8) of the SARFAESI Act, 2002, the right of redemption of the borrower stands extinguished once the publication for sale of the property is made by the secured creditor. However, Rule 8(6) stood the same even after the amendment, and as per Rule 8(6), the Secured Creditor has to serve a 30 days’ notice to the borrower if it is a first sale notice, and from the second sale notice onwards, 15 days’ notice has to be given. After the 2016 amendment, the secured creditor has to give 30 days’ notice prior to the publication of the sale notice to enable the borrower to exercise his right of redemption. However, in the present case, no such notice was issued to the Applicant before effecting the publication of the Auction Sale Notice dated 29.07.2024, fixing the date of auction sale on 31.08.2024. However, the same was despatched only on 01.08.2024 (Typed Set of Papers filed by the 1st Defendant Bank at page 108) after the publication of the Auction Sale Notice was made on 31.07.2024 (Typed Set of Papers filed by the 1st Defendant Bank at pages 111 & 112). Further, the Applicant received the Auction Sale Notice dated 29.07.2024 only on 06.08.2024 (Typed Set of Papers filed by the 1st Defendant Bank at page 106). Hence, the mandatory provisions contemplated under Rule 8(6) of the Security Interest (Enforcement) Rules were not followed by the 1st Defendant Bank. The above legal position was upheld by the Hon’ble Division Bench of the Telangana High Court in the judgment of Sri Sai Annadatha Polymers vs. The Canara Bank , rendered on 27 June 2018 and relevant para has also been noted in his written Argument.

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n) The Applicants contend that, while issuing the Sale Notice and conducting the Auction Sale, the 1st Defendant had not followed the established statutory provisions of law and committed a lot of

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irregularities. Hence, the Auction Sale is non-est in the eye of law and the same is liable to be set aside. Further, with regard to the right of redemption, once the Auction Sale is set aside by the competent Court, the right of redemption will automatically revive, as held by the Hon’ble Division Bench of the Madras High Court in the judgment of Star Trace Engineering Division, represented by its Proprietrix P. Ponnal and Another –Vs– The Registrar, Debts Recovery Tribunal-II, Chennai and Others and the relevant para has also been noted in his Written Argument.

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o) NO PROOF FOR DATE OF AFFIXATION: The Typeset filed by the 1st Defendant Bank (Page No. 30) does not contain any date mentioning the affixture of the Possession Notice and the Sale Notice dated 29.07.2024 (Page No. 110). It appears that it is only a handwritten entry made at the time of filing the typeset of documents. (covered by citation, the Hon’ble DRAT, Kolkata, in Appeal No. 134 of 2018 (arising out of S.A. No. 79 of 2017 in DRT-I, Hyderabad) in the case of Nampally Kishan –Vs– Telangana Grameena Bank, represented by the Authorised Officer and others and relevant para has also been noted in his Written Argument).

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p) UNDER VALUATION ON THE PART OF THE 1^st DEFENDANT BANK:

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The 1^st Defendant Bank, at the time of sanctioning the loan on 11.09.2022, obtained a valuation report from its approved valuer, and the property which is the subject matter of the present application was valued at Rs.4,14,08,669/- (Applicants Additional Typed Set of Papers, Page Nos. 8 & 9). It is further submitted that, in the 1^st Defendant’s Sanction Memorandum dated 30.09.2021 also, the value of the property which is the subject matter of the present application is mentioned as Rs.414.08 lakhs, apart from the hypothecation of machineries and other movable assets valued at Rs.25.08 lakhs (Applicants Additional Typed Set of Papers, Page No. 15). Even in the Possession Notice dated 02.11.2023 also, the value of the property

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was mentioned as Rs.414.08 lakhs (Typed Set filed by the 1st Defendant Bank, Page 26). However, in the Auction Sale Notice dated 29.07.2024, the reserve price fixed for the immovable property is Rs.2,85,00,000/- and the property was sold for a paltry sum of Rs.3,01,50,000/- to the 2^nd Defendant. In the Auction Sale Notice, nothing was mentioned about the hypothecation of machineries and other movable assets valued at Rs.25.08 lakhs at the time of sanction. The above facts clearly prove the undervaluation and collusion between Defendants 1 and 2.

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q) The Applicants further submit that the 1st Defendant Bank filed a Valuation Report dated 01.12.2023 (Typed Set filed by the 1st Defendant Bank, Pages 114 to 123), which is eight months prior to the issuance of the present Auction Sale Notice dated 29.07.2024. Even in the said valuation report, the market value of the property was fixed at Rs.3,50,70,000/-, whereas the property was sold for a sum of Rs.3,01,50,000/- to the 2^nd Defendant in the Auction Sale held on 31.08.2024. In the above-mentioned Valuation Report dated 01.12.2023, the value of the building was mentioned as Rs.1,42,65,722/-, whereas in the Registered Sale Certificate (Annexure-1A), the value of the building was mentioned as Rs.2,03,50,000/- (Additional Typed Set filed by the 2nd Defendant at Page 6). The above facts clearly prove the undervaluation. Hence, the Auction Sale is liable to be set aside on this ground as well.

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Comparision of decrease in reserve prices in the sale Notices :-

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	Sale Notice	Sale Notice	Sale Notice	Decreased
	Date	Date	Date	Amount
	29.12.2023	28.03.2024	29.07.2024
Property	Rs.3,50,66,000/-	Rs.3,15,60,000/-	Rs.2,85,00,000/-	Rs.65,66,000/-
No.1

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The above comparison clearly shows that the 1st Defendant Bank intentionally published a lesser reserve price in the Sale Notice, by

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which the 2nd Defendant could purchase the property in the auction sale conducted by the 1st Defendant Bank. The 1st Defendant Bank had not obtained any valuation report before reducing the reserve price, and the same is in violation of Rule 8(5). The above facts from their own documents clearly establish the undervaluation of the property and is covered, vide citation “ the Hon’ble Division Bench of the Andhra Pradesh High Court, in the case of M/s. Pochiraju Industries Ltd. – Vs– Punjab National Bank and Others. and relevant para has also been noted in his written Argument. ”

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r) Rule 9 (3) of the Security Interest Enforcement Rules was violated: It is

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respectfully submitted that the Auction Sale was fixed on 31.08.2024 by the 1st Defendant, and the 2nd Defendant paid the 10% EMD on 30.08.2024. In the Auction Sale conducted on 31.08.2024, the 2nd Defendant was declared as the successful bidder. As per Rule 9(3), he ought to have paid 25% of the bid amount (including the EMD) either on 31.08.2024 or on the next working day; in the present case, since 01.09.2024 is Sunday, the 2nd Respondent ought to have paid the 25% amount on or before 02.09.2024. However, the 2nd Defendant completed payment of the 25% of the bid amount only on 03.09.2024, which is evident from the Sale Certificate dated (Additional Typed Set filed by the 2nd Defendant at Page-4). The 25% of the bid amount, including 10% EMD, comes to Rs. 75,37,500/- (EMD amount of Rs.29,00,000/- paid on 30.08.2024 and the balance amount of Rs.46,37,500/- paid on 03.09.2024). In this regard, the calculation memo filed by the 2nd Defendant dated 07.05.2025 is wrong, and the same is filed only to mislead this Hon’ble Tribunal. As a matter of fact, the 25% has to be calculated from the total sale consideration of Rs.3,01,50,000/-; however, in the calculation memo, the 2nd Defendant reduced the EMD amount and calculated 15% from the balance amount of Rs.2,72,50,000/-. The provision is very clear that 25% of the sale price is inclusive of EMD and not exclusive of the EMD. The relevant Rule 9 (3) is extracted hereunder

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“…[(3) On every sale of immovable property, the purchaser shall

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immediately, i.e., on the same day or not later than next working day, as

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the case may be, pay a deposit of twenty five percent of the amount of the sale price, which is inclusive of earnest money deposited, if any, to the authorized officer conducting the sale and in default of such deposit, the property shall be sold again.]”

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From the above provision, it is crystal clear that 25% of the sale price has to be calculated from the entire sale price and not after deducting the EMD amount. The 2nd Defendant has filed the calculation memo with an intention to mislead this Hon’ble Tribunal and is attempting to play fraud on this Tribunal. (The Applicant has relied on the citation - the Hon’ble Division Bench of the Andhra Pradesh High Court, in the case of Smt. P. Sudha Lakshmi, W/o. … –Vs– Bank of India, Boduppal Branch and relevant para has also been noted in his written Argument ).

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s) In the present case on hand, the 25% of the sale price was paid beyond the time fixed under Rule 9(3). Hence, the Auction Sale dated 31.08.2024 and the Sale Certificate dated 10.09.2024 issued by the 1st Defendant in favour of the 2nd Defendant and registered on 11.09.2024 are not legally sustainable, and the same are liable to be set aside.

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t) The Applicants further submit that the description of the property mentioned in the Auction Sale Notice dated 27.09.2024 and the description of the property mentioned in the Registered Sale Certificate dated 11.09.2024 do not match with each other, and there are discrepancies. Hence, on this ground also, the Auction Sale is vitiated.

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SCHEDULE OF PROPERTY

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Item :1

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Mortgage of Land and Commercial Building located at plot No 19 (south Part) and Plot No 20, Old T S No 1553 & 1554/2, T.S.Ward, No 5, C.Ward No:29, Kennet Hospital Road, Madurai South Taluk, Madurai District. Land measuring 3920 Sq.ft or 8.99 Cents, commercial Building Slit,

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First, Se-cond, Third, Fourth and Terrace Floor Measuring 7169.07 Sqft as per approved plan valued Rs.414.08 Lakhs

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Boundary :

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North : Plot no 19 (North Part) South : Plot no 21 East : 40 feet wide common road West : Plot no 15 & 16

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Item :2

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Mortgage of Land and Residential Building situated at Door No 17, TS No 1163/10, Property Tax Assessment No 38548, Corporation Ward No 12, Survey ward No 5, Yoganandasamy madam sannidhi street, Motilal Main road, Madurai Town, Madurai west Taluk, Madurai District, Land measuring 499.5 Sqft or 1.15 cents excluding common area with house building at ground floor 364.5 sqft, First floor 364.5 Sqft, second floor 364.5 sqft and a total of 1093.5 sqft

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Boundary :

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North : Yogananthasamy madam sannathi street

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East : Door no 16, T.S.No 1163/11 house of rangasamy pillai and common wall

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South : Property belongs to R Kanagarajan

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West : Five feet wide pathway, door no 18, T.S. No 1163/8 of K Dharmar

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The Applicants have submitted the following List of documents in support of their claim in the SA, which are as follows:

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S.No.	Date	Details of Documents
1.	29.08.2023	13(2)Demand Notice
2.	28.02.2024	Auction Sale Notice
3.	01.03.2024	Order passed by the CJM in Crl.M.P.No.143
		of 2024(Impugned Order)
4.	03.05.2024	Auction Sale Notice
5.	29.07.2024	Impugned Auction Sale Notice
6.	02.09.2024	Notice from the Advocate Commissioner

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Additional Typed set of Paper

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S.No.	Date	Particulars
1.	11.09.2021	Valuation report
2.	30.09.2021	Sanction Memorandum

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3 . On the other hand, the Counsel for the 1^st Defendant Bank appeared before this Tribunal and filed Vakalat, Written Argument, Reply Statement, Typed set, Additional Typed set & Typed set – III in which the 1^st Defendant Bank has vehemently denies each & every allegations under the heading "Facts of the case" & "Grounds" of the SARFAESI Application. The Applicants are put to strict proof of every one of the said allegations with valid & acceptable evidence. Most of the allegations are unwarranted so far as the matter-in-issue is concerned.

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a) It is further submitted that the following allegations of the Applicant's grounds are denied by the Defendant;

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Paras ii and iii - The Applicant has not specifically stated which act of the Defendant Bank has prejudiced the Applicant, and the Applicant has failed to mention the specific provision which has been violated by the Defendant Bank under the SARFAESI Act and Rules. The Defendant Bank has appropriated all payments made by the Applicant in his loan account, and the Defendant Bank classified the Applicant's account as NPA in accordance with the guidelines relating to asset classification as issued by the RBI. Further, the Defendant Bank charged interest as per the agreed contractual terms in accordance with the guidelines of the RBI, and it is provided that the interest payable by the borrower shall be subject to changes in interest rates made by the Reserve Bank from time to time. Further, banks are bound by the Reserve Bank's directives on interest rates on loans and advances, as per Sections 21 and 35A of the Banking Regulation Act, 1949, and on the basis of such directives, the banks are obliged to give effect to any revision of interest rates, whether upwards or downwards, for all existing advances from the date the directives or revised interest rates (change in BPLR and spread) come

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into force, unless the directives specifically provide otherwise. Thereby, the interest charged by the Defendant Bank is in accordance with the guidelines of the RBI, and the Applicant, who has abided by the conditions while obtaining the credit facility from the Defendant Bank, is now estopped from questioning the same.

¶132

Para iv to vi - As per the Resolution Framework 2.0 – Resolution of COVID-19 related stress of Micro, Small and Medium Enterprises dated 05.05.2021, if a person claims restructuring under MSME, he ought to have applied to the lending institution in writing, and only upon such written communication will the request be considered as per the terms and conditions of the said notification. Moreover, a person applying for restructuring under MSME is mandated to be registered under the Udyam Registration Portal before proceeding with the loan restructuring process. However, in the case of the Applicant, he has failed to produce documents to show whether he applied for loan restructuring along with the MSME Registration Certificate. Further, as per the Apex Court decision on the framework for revival and rehabilitation of MSMEs, the Defendant Bank places its reliance on

¶133

M/s. Pro Knits versus The Board of Directors of Canara Bank

¶134

(2024 INSC 565) and relevant para has also been noted in his written Argument.

¶135

Para vii - The Defendant Bank served the Possession Notice to the Applicants, and the same was received by them on 03.11.2023. The Possession Notice was published in two leading newspapers within the stipulated period of seven days from the date of symbolic possession, and the same was affixed on a conspicuous part of the property. To evidence this, photographs have been annexed herewith.

¶136

Para viii - The Defendant Bank served the sale notice to the Applicants, and the same was published in two leading newspapers and affixed on a conspicuous part of the property.

¶137

Page 17 of 34

¶138

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¶139

Para ix - The Defendant Bank has mentioned the correct updated amount in the said sale notice. The Defendant Bank, though it issued proper notices under Rule 8(6), the Applicant intentionally waived his right to redeem the property. The Defendant Bank places its reliance on Arce Polymers Pvt. Ltd. v. Alpine Pharmaceuticals Pvt. Ltd. & Ors., reported in (2022) 2 SCC 221 and relevant para has also been noted in his written Argument.

¶140

Para x - The Defendant Bank has fixed the reserve price of the property after obtaining a proper valuation report from an approved valuer, and the value of the property has been fixed in accordance with the guidelines of the RBI.

¶141

Para xi to xiv - The Defendant Bank has mentioned all the details in the CJM petition without any suppression, and the Defendant Bank filed the said petition along with the necessary affidavit before the Hon’ble Chief Judicial Magistrate, and there was no contradiction in the dates and facts of the Demand Notice and Possession Notice. Further, Section 14 of the SARFAESI Act does not warrant notice to the borrowers, which is supported by the judgment of the Hon’ble Madras High Court.

¶142

Para i - The Defendant Bank has initiated the recovery measures in accordance with the procedures contemplated under the SARFAESI Act and Rules, as laid down by the Hon’ble Supreme Court in Vasu P. Shetty v. M/s Hotel Vandana Palace & Ors. and Mathew Varghese v. M. Amritha Kumar and relevant para has also been noted in his written Argument.

¶143

b) It is further submitted that the Defendant Bank has issued the Demand Notice, and the same was duly served on the Applicant and further submits that it has taken symbolic possession of the property and issued the Possession Notice, and the Possession Notice was duly served

¶144

Page 18 of 34

¶145

SA No. 585/2024

¶146

on the Applicant and affixed on a conspicuous part of the property, and the Possession Notice was also published both in a Tamil daily and an English daily. The Defendant Bank respectfully submits that the Applicant has not sent any reply to the 13(2) Demand Notice, and nonsending of a reply to the 13(2) Demand Notice is fatal to his case. The Defendant Bank obtained a valuation report from an approved valuer for the property, who assessed the value of the property, and the Defendant Bank has properly and rightly fixed the value of the property and the reserve price.

¶147

c) The Defendant Bank issued the Sale Notice, and the same was duly served on the Applicant and affixed on a conspicuous part of the property, and the Sale Notice was also published in both a Tamil daily and an English daily. The Defendant Bank auctioned the property, and one Thiru Anbazhagan was declared the highest bidder in the auction held on 31.08.2024. The Defendant Bank confirmed the sale in favour of the auction purchaser and issued the Sale Certificate and registered the same in favour of the auction purchaser.

¶148

d) The Defendant Bank fixed the reserve price of the property after obtaining proper valuation from an approved valuer, and the value of the property has been fixed as per the guidelines of the RBI.

¶149

Sr.No	Sale Notice	Date	Reserve Price
1	1^stSale Notice	29.12.23	Rs.3,50,66,000/-
2	2^ndSale Notice	02.02.24	Rs.3,50,66,000/-
3	3^rdSale Notice	28.02.24	Rs.3,50,66,000/-
4	4^thSale Notice	28.03.24	Rs.3,15,60,000/-
5	5^thSale Notice	03.05.24	Rs.3,15,60,000/-
6	6^thSale Notice	03.06.24	Rs.3,15,60,000/-
7	7^thSale Notice	04.07.24	Rs.3,15,60,000/-
8	8^ttSale Notice	29.07.24	Rs.2,85,00,000/-

¶150

Page 19 of 34

¶151

SA No. 585/2024

¶152

As per Bank’s internal guidelines, if the Sale has not materialized, the authorized officer has right to reduce 10% of reserve price in the next Sale Notice with maxim limit of 20% of reserve price in the subsequent Sale Notices irrespective of number of Sale Notices and the next higher authority can permit reduction in reserve price from 20% to 30% and the further reduction more than 30% shall be permitted by CGM/GM/HO/CAC.

¶153

e) On foot of the above reduction over the reserve price, the Bank has fixed the reserve price of the property for the first three sale notices as Rs.3,50,66,000/-, and the reserve price for the 4th to 7th sale notices was reduced by another 10%. Further, the sale has been conducted in a fair and transparent manner, and moreover, even after issuance of seven sale notices, none came forward to bid for the property, and only on the 8th sale notice, the property was sold in public auction.

¶154

The reserve price fixed	Rs.2,85,00,000/-	-
25% of Reserve Price	Rs.71,25,0001-	-
l0% of EMD Amount	Rs.29,00,000/- (Rs.28,50,000/- + Rs.50,000/-)	Reflected in the Purchaser Account statement on 29.08.24
Remaining 15% of	Rs.42,75,000/-	Reflected in the
EMD amount		Purchaser account statement on 02.09.24
Total of EMD	Rs.72,75,000/-	After the payment of
(10% + 15%)	(Rs.29,00,000/- + Rs.42,75,000/-)	25% of EMD amount, the purchaser account was left with balance of Rs.20,84,524.52

¶155

The Applicant has alleged that the purchaser has not paid 25% of the bid amount in time. The sale was fixed on 31.08.2024 (Saturday), and 01.09.2024 fell on Sunday, and the purchaser paid the remaining 15% on the next working day, i.e., 02.09.2024. Moreover, a sum of Rs.3,62,500/was paid on 03.09.2024, which is none other than the EMD amount for the excess sale amount increased from the reserve price. Further, it is pertinent

¶156

Page 20 of 34

¶157

SA No. 585/2024

¶158

to note that the purchaser’s account had a balance of Rs.20,84,524.52 on 02.09.2024 itself. As per the Rule, it is mandated to deposit 25% of the reserve price, and only as a precautionary measure and upon the advice of the Defendant Bank, the purchaser paid Rs.3,62,500/-, which is neither willful nor wanton. The balance available in the purchaser’s account clearly shows that there was no mala fide intention on the part of the Defendant Bank or the purchaser to cause delay in payment of 25% of the bid amount.

¶159

f) The Defendant Bank respectfully submits that there is no procedural irregularity on the part of the Defendant Bank in issuing the Demand Notice, Possession Notice, Sale Notice and Sale Certificate under the SARFAESI Act and Rules, and that the alleged procedural irregularities mentioned in the SARFAESI Application are neither factually nor legally correct. The Defendant Bank has issued the Demand Notice, Possession Notice, Sale Notice and Sale Certificate strictly in accordance with the provisions and procedures of the SARFAESI Act and Rules. Hence, if the Sale Notice, the Sale held, and the order of the Chief Judicial Magistrate are set aside, the Defendant Bank will be put to untold hardship and irreparable loss and injury; on the other hand, no prejudice will be caused to the Applicant. The balance of convenience lies in favour of the Defendant Bank.

¶160

Therefore, it is prayed that this Hon'ble Tribunal may be pleased to dismiss the Application with cost and thus render justice.

¶161

TYPED SET OF DOCUMENTS FILED BY THE 1^st DEFENDANT BANK

¶162

S.No	Date	Particulars
1.	29.08.2023	Demand Notices with Receipt of Written Acknowledgement
2.	02.11.2023	Possession Notwith ADCards
3.	02.11.2023	Photography showingaffixture of Possession Notice
4.	05.11.2023	Paper Publication of Possession Notice dt.02.11.23 in English Daily
5.	05.11.2023	Paper Publication of Possession Notice dt.02.11.23 in Tamil Daily
6.	29.12.2023	1^st SaleNotice
7.	02.02.2024	2^nd SaleNotice
8.	28.02.2024	3^rd SaleNotice
9.	28.03.2024	4^th SaleNotice

¶163

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¶165

10.	03.05.2024	5^th SaleNotice
11.	03.06.2024	6^th SaleNotice
12.	04.07.2024	7^th SaleNotice
13.	29.07.2024	8^th SaleNoticewith ADCards &ReturnCovers
14.	29.07.2024	Photography showingaffixture ofSaleNotice
15.	31.07.2024	Paper Publication of Sale Notice dt.29.07.24 in English Daily
16.	31.07.2024	Paper Publication of Sale Notice dt.29.07.24 in Tamil Daily
17.	10.09.2024	Sale Certificate
18.	01.12.2023	Valuation Report

¶166

ADDITIONAL TYPED SET FILED BY THE 1^st DEFENDANT BANK

¶167

S.No	Date	Particulars
1.	05.05.21	RBICircularoverUdhayam Registration
2.	****	Bank’s Internal Circular over reduction of Reserve Price
3.	28.08.24 to 03.09.24	Accounts Statement of the Auction Purchaser
4.	****	Vacant premises of the Applicant while taking physical possession
5.	03.12.21	Arce Polymers vs Alphine Pharma (Waiver isintentional Relinquishment)
6.	01.08.24	ProKnitsvsTheBoard of Directors ofCanara Bank
7.	24.10.24	P K. Krihna Kumar vsIndusindBank

¶168

TYPED SET -III FILED BY THE 1^st DEFENDANT BANK

¶169

S.No.	Date	Particulars
1.	01.08.24	M/s.ProKnitsVsIDFCBank&another
2.	28.07.25	Shri Shri Swami Samarth Construction & Finance
		Solution Vs the Board of Directors of NKGSB
		Co-OperativeBank Limited & others

¶170

4. The 2^nd Defendant/Auction Purchaser also appeared before this Tribunal and filed Vakalat, Reply Statement, Written Argument, Index to Type Set & Additional Type set in which he submitted that this S.A. is not maintainable as against this Defendant, both in law and on facts, and the same has to be dismissed in limine.

¶171

The 2nd Defendant submitted that the property was purchased by the 2nd Defendant in the public auction dated 31.08.2024 conducted by the

¶172

Page 22 of 34

¶173

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¶174

1st Defendant Bank. The 2nd Defendant is a bona fide purchaser for valuable consideration of Rs.3,01,50,000/- in the said public auction.

¶175

The 2nd Defendant submitted that the Applicants admitted their liability and the creation of security interest over the property, and also the receipt of SARFAESI notices in their pleadings in the main S.A.

¶176

The 2nd Defendant submitted that this S.A. No. 585/2024 has been filed after the completion of the entire sale proceedings conducted by the 1st Defendant Bank.

¶177

The 2nd Defendant submitted that there is no collusion with the 1st Defendant Bank. It is pertinent to note that the 2nd Defendant is a genuine purchaser having a decent reputation in his business, and hence there is no need for collusion with the 1st Defendant Bank. More particularly, the 2nd Defendant has not committed any fraudulent activities in collusion with the 1st Defendant with regard to the said Sale Notice dated 29.07.2024 and in continuation of the order of the Learned CJM, Madurai, in Crl. M.P. No. 1431/2024 dated 30.08.2024.

¶178

The 2nd Defendant submitted that the 2nd Defendant participated in the above said e-auction dated 31.08.2024 along with other participants, and the 2nd Defendant was not the sole participant in the said sale. It is pertinent to note that the e-auction started at 12:30 P.M. with the upset price of Rs.2,85,00,000/-, and finally, the said e-auction was completed at 5:30 P.M. with the highest price of Rs.3,01,50,000/-. The flow of increasing bid amount was up to Rs.16,50,000/-. This Hon’ble Tribunal may come to the conclusion that the sale was conducted in a proper manner and that more bidders eagerly participated in the e-auction. Hence, the sale conducted on 31.08.2024 was in a fair manner, and the same is valid.

¶179

Page 23 of 34

¶180

SA No. 585/2024

¶181

The 2nd Defendant submitted that the 2nd Defendant paid 15% of the amount, i.e., Rs.46,37,500/-, as per the confirmation letter issued by the 1st Defendant Bank. The balance 75% of the amount, i.e., Rs.2,23,11,000/-, was paid by the 2nd Defendant on 10.09.2024 within the prescribed period of 15 days from the date of confirmation of sale.

¶182

The 2nd Defendant submitted that, as per the order of the Learned CJM, Madurai, it is learnt that the 1st Defendant duly complied with all the formalities prescribed under the SARFAESI Act and Rules with regard to the demand notice, possession notice, and sale notice.

¶183

The 2nd Defendant submitted that the Learned CJM, Madurai passed the order for taking physical possession of the property with due care and after scrutinizing the application filed by the 1st Defendant Bank. The Applicants have no right to challenge the order passed by the Learned CJM, Madurai.

¶184

The 2nd Defendant submitted that the above said order of the Learned CJM, Madurai was executed through the Advocate Commissioner, and the physical possession of the property has been handed over to the 2nd Defendant on 12.09.2024. At present, the 2nd Defendant is enjoying the property with peaceful possession without any interruption.

¶185

The 2nd Defendant submitted that the order passed by the Learned CJM, Madurai under Section 14 is legally sustainable and the same is executable under law. After acquiring the title in the aforesaid manner, the 2nd Defendant mortgaged the subject property for the purpose of developing his business with Punjab National Bank by virtue of a Memorandum of Deposit of Title Deeds dated 04.03.2025, registered as Doc. No. 2140/2025.

¶186

The 2nd Defendant submitted that it is pertinent to note that the Applicants have no right to file this S.A. against the Section 14

¶187

Page 24 of 34

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¶189

application after losing their right of redemption of the property once the sale notice has been issued by the 1st Defendant Bank.

¶190

The 2nd Defendant submitted that the 2nd Defendant purchased the property for valuable consideration. The 2nd Defendant paid the proper stamp duty for the entire property as per the value determined by the Registration Department of the Government of Tamil Nadu.

¶191

The 2nd Defendant submitted that the 2nd Defendant is a bona fide purchaser and that there is no prima facie case made out against this 2nd Defendant, and the balance of convenience is also in his favour. If the sale is set aside, he will be put to irreparable loss and hardship. In such a situation, his interest would be protected as per Section 19 of the SARFAESI Act by this Hon’ble Tribunal.

¶192

Hence, it is prayed that this Hon'ble Tribunal may be pleased to dismiss the above SARFAESI Application with cost and thus render justice.

¶193

INDEX TO TYPE SET FILED BY THE 2^nd DEFENDANT

¶194

S.No.	Date	Particulars
1.	11.09.2024	Sale certificate executed by Canara Bank in favour of Anbazhagan vide Doc.No.9139/2024
2.	04.03.2025	Memorandum of deposit of title deeds executed by A.Anbazhagan in favour of Punjab National bank videDoc.No.2140/2025
3.	11.01.2025	PropertyTax Receipt

¶195

1^st ADDITIONAL TYPED SET FILED BY THE 2^nd DEFENDANT

¶196

S.No	Date	Particulars
1.	04.09.2024	Statement of account for the period from
		01.08.2024to 31.08.2024
2.	03.10.2024	Statement of account for the period from
		01.09.2024 to 30.09.2024

¶197

5. On the basis of the above pleadings, now the points which arise for consideration are:-

¶198

i) Whether the Applicants are entitled to get the reliefs as prayed for?

¶199

Page 25 of 34

¶200

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¶201

ii) Whether the Applicants have been able to prove their case in their favour?

¶202

6. Having heard the parties and after going through the entire documents available on record, I find that the Applicants have availed various credit facilities from the 1^st Defendant Bank by mortgaging the schedule-mentioned properties. It is further stated that, initially, the Applicants were regular in repayment as agreed with the 1^st Defendant Bank. It is admitted by the Applicants in their pleadings that, due to the COVID-19 pandemic and the huge loss suffered in their business, they were unable to repay certain loan dues to the 1^st Defendant Bank. Hence, the 1^st Defendant Bank classified the loan account as NPA on 28.08.2023 and proceeded under the SARFAESI Act. Though the Applicants have contended that such classification is contrary to the RBI guidelines applicable to MSMEs during the COVID-19 period, they have not placed any material on record to show that they had applied for restructuring of the loan account in accordance with the said guidelines or that they fulfilled the eligibility criteria prescribed therein. Hence, this Tribunal does not find any illegality in the classification of the loan account as NPA. It is also observed that neither the Applicants nor the 1^st Defendant Bank has submitted the statement of accounts in respect of the loan account.

¶203

Thereafter, the 1st Defendant Bank issued a Demand Notice under Section 13(2) of the SARFAESI Act on 29.08.2023 to the borrowers for a sum of Rs.2,30,40,057.86/- (Rupees Two Crore Thirty Lakhs Forty Thousand Fifty-Seven Rupees and Eighty-Six Paise only) as on 29.08.2023. I have also perused the documents filed by the 1st Defendant Bank. The Bank has submitted xerox copies of the Demand Notice along with receipts of written acknowledgements, which are annexed at pages 1 to 24 of the Bank’s typed set of papers. However, out of four borrowers, the Bank has produced only two Xerox copies of the said notice with written acknowledgements (xerox copies) bearing the endorsement “Received”, and this Tribunal is also unable to verify the authenticity of the signature at page No. 13 of the typed set of

¶204

Page 26 of 34

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SA No. 585/2024

¶206

papers. In view of the above, the Defendant Bank has failed to prove that the Demand Notice dated 29.08.2023 was actually served upon the borrowers in accordance with the provisions of the SARFAESI Act and Rules. The 1^st Defendant Bank has not filed the Original Documents inspite of direction.

¶207

I also find that the 1^st Defendant Bank has issued a Possession Notice dated 02.11.2023 and has also filed, in the typed set, the AD cards, paper publications, and photographs evidencing affixture of the Possession Notice (page Nos. 25–29 of the 1^st Defendant Bank’s typed set of papers). The Bank has also filed xerox copies of the Possession Notice and AD cards purportedly showing service of the Possession Notice on the Applicants at page Nos. 27 to 29 of the typed set of papers; however, the enclosed AD card bearing the name “Tanishkaa Fashion” has been struck off and rewritten as “N.Nagendran”. Further, the Bank has failed to produce the AD card in respect of one of the borrowers, namely Mr. Kannan R. Moreover, in the filed xerox copies of the paper publications, the name of the newspaper, date, and place of publication are not available. Further, in the photographs evidencing affixture of the Possession Notice dated 02.11.2023, no details regarding the date and place of affixture are visible. Since there are material irregularities in the documents filed by the 1^st Defendant Bank with regard to the paper publication and affixture of the Possession Notice, this Tribunal holds that the said Possession Notice is not sustainable in the eye of law. It is also pertinent to note that the 1^st Defendant Bank has failed to produce the original documents despite specific direction. The Rule 8(1) & (2) of Security Interest Enforcement Rules, 2002, clearly says that

¶208

"8. Sale of immovable secured assets.

¶209

(1) Where the secured asset is an immovable property, the authorized officer shall take or cause to be taken possession, by delivering a possession notice prepared as nearly as possible in Appendix IV to these rules, to the borrower and by affixing the possession notice on the outer door or at such conspicuous place of the property."

¶210

(2) The possession notice as referred to in sub-rule (1) shall also be published in two leading newspaper, one in vernacular language having sufficient circulation in that locality, by the authorized officer.

¶211

Page 27 of 34

¶212

SA No. 585/2024

¶213

In view of the above Provision, I find that the 1^st Defendant Bank has not followed the above provision in issuance of Possession Notice.

¶214

Thereafter, the 1^st Defendant Bank issued the 1^st Sale Notice dated 29.12.2023 to the Applicants, but the sale was not held for want of bidders. The 1^st Defendant Bank also issued the 2^nd Sale Notice dated 02.02.2024 to the Applicants. Further, the 1^st Defendant Bank issued the 3^rd Sale Notice dated 28.02.2024; however, as there were no bidders, the said sale also did not materialize. The Bank has failed to produce any evidence such as AD cards, paper publications, and proof of affixture of the Sale Notices. Thereafter, the 1^st Defendant Bank obtained an order dated 01.03.2024 passed by the learned Chief Judicial Magistrate, Madurai, in Crl.M.P. No. 143 of 2024 for taking physical possession of the schedule-mentioned properties, and an Advocate Commissioner was also appointed to take physical possession of the secured assets.

¶215

Thereafter, the 1^st Defendant Bank issued the 4^th Sale Notice dated 28.03.2024, 5^th Sale Notice dated 03.05.2024, 6^th Sale Notice dated 03.06.2024, and 7^th Sale Notice dated 04.07.2024; however, as there were no bidders, even these sales did not materialize. Moreover, the Bank has not filed any material evidence to prove that the said Sale Notices were issued to the Applicants. The 1^st Defendant Bank thereafter issued the impugned 8^th Sale Notice dated 29.07.2024 for a sum of Rs.2,47,80,086.70/- (Rupees Two Crore Forty-Seven Lakh Eighty Thousand Eighty-Six and Seventy Paise only) and proceeded to sell the impugned property in favour of the 2^nd Defendant on 31.08.2024. I also find that the 1^st Defendant Bank has filed xerox copies of the Sale Notice, AD cards, and Paper Publication. The Bank has submitted xerox copies of AD cards for having sent the Sale Notice to the Applicants at pages 106 to 109 of the typed set of papers. Further, the Bank has filed the original photograph showing affixture of the Sale Notice on a conspicuous part of the property; however, no details regarding the date and place of affixture are visible. Additionally, the Bank has filed xerox copies of Paper Publications made in both Tamil and English newspapers, but the

¶216

Page 28 of 34

¶217

SA No. 585/2024

¶218

name of the newspaper, date, and place of publication are not available at pages 111 to 112 of the typed set of papers. The 1^st Defendant Bank has not filed the original documents to verify the genuineness of the documents despite directions of this Court. Thus, I find that the Defendants Bank have not followed the Rule 8(6) & (7) of the Security Interest (Enforcement) Rules 2002, which clearly says that,

¶219

"Rule 8(6) & (7) in the Security Interest (Enforcement) Rules, 2002:-

¶220

"( 6 ) The authorized officer shall serve to the borrower a notice of thirty days for sale of the immovable secured assets, under sub-rule (5):

¶221

[Provided that if the sale of such secured asset is being effected by either inviting tenders from the public or by holding public auction, the secured creditor shall cause a public notice in the Form given in Appendix IV-A to be published in two leading newspapers including one in vernacular language having wide circulation in the locality.]"

¶222

"( 7 ) [Every notice of sale shall be affixed on the conspicuous part of the immovable property and the authorised officer shall upload the detailed terms and conditions of the sale, on the web- site of the secured creditor, which shall include;

¶223

( a)the description of the immovable property to be sold, including the details

¶224

of the encumbrances known to the secured creditor;

¶225

(b)the secured debt for recovery of which the property is to be sold;

¶226

(c)reserve price of the immovable secured assets below which the property may not be sold;

¶227

(d)time and place of public auction or the time after which sale by any other mode shall be completed;

¶228

(e)deposit of earnest money as may be stipulated by the secured creditor;

¶229

(f)any other terms and conditions, which the authorized officer considers it necessary for a purchaser to know the nature and value of the property.]"

¶230

On scrutiny of the Valuation Report dated 01.12.2023 (pages 114 to 123 of the 1st Defendant Bank typed set of papers) filed by the 1st Defendant Bank, the following observations are brought on record:

¶231

i) Guideline Value of the property – Rs.2,33,00,000/-

¶232

ii) Present Market Value of the property – Rs.3,50,70,000/-

¶233

Page 29 of 34

¶234

SA No. 585/2024

¶235

The Valuation Report dated 11.09.2021, filed by the Applicants in the additional typed set at pages 1 to 13, shows the following:

¶236

i) Guideline Value of the property – Rs.1,92,21,469/ii) Present Market Value of the property – Rs.4,14,08,669/iii) Realizable Value of the property – Rs.3,72,67,802/iv) Distress Value of the property – Rs.3,31,26,935/-

¶237

From the above valuation reports, it is evident that there has been a substantial reduction in the valuation of the properties during the relevant period, as the Market Value has significantly declined from Rs.4,14,08,669/- (Four Crore Fourteen Lakh Eight Thousand Six Hundred Sixty-Nine Rupees Only) in 2021 (As per the approved valuation of Rs.414.08 lakhs mentioned in the Possession Notice dated 02.11.2023 and in all the Sale Notices issued by the 1^st Defendant Bank, except the 2^nd Sale Notice dated 02.02.2024, which contains incomplete pages.) to Rs.3,50,70,000/- (Three Crore Fifty Lakh Seventy Thousand Rupees Only) in 2023 . Ordinarily, the value of landed property tends to appreciate over time; however, the valuation filed by the Bank clearly shows a drastic reduction. Further, the signature of the secured creditor is absent in the valuation reports, and the date of inspection of the properties is not mentioned. These irregularities in the Valuation Reports filed by the 1^st Defendant Bank indicate non-compliance with the prescribed procedures and demonstrate that the Bank has failed to establish strict adherence to Rule 8(5) of the Security Interest (Enforcement) Rules, 2002. which clearly says:-

¶238

"(5) Before effecting sale of the immovable property referred to in sub-rule (1) of rule 9, the authorized officer shall obtain valuation of the property from an approved valuer and in consultation with the secured creditor , fix the reserve price of the property and may sell the whole or any part of such immovable secured asset by any of the methods provided therein" .

¶239

Page 30 of 34

¶240

SA No. 585/2024

¶241

I also find that the 2nd Defendant has enclosed a Registered Sale Certificate bearing Document No. 9139 of 2024 dated 11.09.2024. The 2^nd Defendant has also filed copies of the Statements of Accounts dated 04.09.2024 and 03.10.2024 (pages 1 to 10 of Additional Typed Set–I filed by the 2nd Defendant) , along with proof of payment of 25% of the sale amount, i.e., Rs.75,37,500/- (Rupees Seventy-Five Lakhs Thirty-Seven Thousand Five Hundred only), and the registered Sale Certificate in favour of the 2^nd Defendant (pages 1 to 29 of the Index to Typed Set filed by the 2nd Defendant) . On perusal of the records, it is observed that at page No. 15 of 2^nd Defendant type set in Index, it is mentioned that 25% of the bid amount was to be paid on or before 02.09.2024. Further, in the Sale Notice dated 29.07.2024 (at page No. 104 of the 1st Defendant Bank’s typed set) , it is stated under Clause (j) that the remaining and final amount shall be paid by the bidder within 15 days from the date of confirmation of sale by the secured creditor (i.e., on or before 15.09.2024). However, in the registered Sale Certificate dated 11.09.2024 (at page No. 4 of 2^nd Defendant Typed set) , the date of payment of 25% of the sale amount is shown as 03.09.2024, on which date the auction purchaser paid Rs.46,37,500/- (Rupees Forty-Six Lakhs Thirty-Seven Thousand Five Hundred only). This clearly constitutes a violation of the terms and conditions of the Sale Notice dated 29.07.2024 (pages 97 and 109 of the typed set filed by the 1st Defendant Bank) . Further, it is also an admitted fact that the auction purchaser did not deposit 25% of the sale consideration within the time stipulated under Rule 9(3) of the Security Interest (Enforcement) Rules, 2002, which mandates that such deposit shall be made on the same day or not later than next working day. In the present case, the payment was made beyond the prescribed period, which is in clear violation of the mandatory provisions of the Rules. Such non-compliance goes to the root of the matter and renders the sale invalid.

¶242

I also find that there are certain discrepancies between the Schedule of Property given in the Sale Notice dated 29.07.2024 and the Registered Sale Certificate dated 11.09.2024. In particular, the total extent of the

¶243

Page 31 of 34

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SA No. 585/2024

¶245

building in Property No.1 is mentioned as 7169.07 sq.ft in the Sale Notice dated 29.07.2024, whereas in the Registered Sale Certificate dated 11.09.2024, each floor is mentioned as 3920 sq.ft, aggregating to a total of 15,680 sq.ft. Hence, there is a clear discrepancy in the description in the area of the secured asset, particularly with regard to Property No.1, as reflected in the records. On comparison of the property descriptions contained in the Auction Sale Notice dated 29.07.2024 and the Registered Sale Certificate dated 11.09.2024, it is evident that the particulars relating to Property No.1 do not tally with regard to the total extent and are inconsistent in material aspects. Such mismatch in the description of the property creates serious ambiguity regarding the identity of the secured asset and affects the legality of the possession as well as the subsequent sale. The secured asset must be clearly identified and consistently described in all statutory proceedings, and any such discrepancy, especially in the Registered Sale Certificate, vitiates the entire process.

¶246

The contention of the 2nd Defendant/Auction Purchaser that he is a bona fide purchaser for valuable consideration has also been considered by this Tribunal. However, it is well settled that if the sale itself is vitiated on account of non-compliance with mandatory statutory provisions, the same cannot be sustained merely on the ground that the purchaser is a bona fide purchaser. The illegality in the conduct of the sale cannot be cured on that ground. However, the Auction Purchaser has also not complied the Terms and Conditions of Sale Notice as he has failed to pay the 25% of EMD within the statutory period.

¶247

Since, the 1^st Defendant has failed to follow the SARFAESI Act & Rules strictly in issuance of Possession Notice dated 02.11.2023, hence the Order dated 01.03.2024 passed by the Chief Judicial Magistrate, Madurai District in Crl.M.P.No.143 of 2024 is not sustainable. I also find that the 1^st Defendant had issued Registered Sale Certificate dated 11.09.2024 on the basis of Sale Notice dated 29.07.2024 and sale held on 31.08.2024, by not following the SARFAESI Act & Rules strictly before issuance of Sale

¶248

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¶249

SA No. 585/2024

¶250

Certificate. Hence, the Registered Sale Certificate dated 10.09.2024 is also not sustainable under law.

¶251

The Applicants have no doubt being defaulters are liable to pay the loan amount to the Defendant Bank and the Bank has been given ample power to recover the outstanding loan amount from the borrowers by invoking the SARFAESI Act and without the intervention of any Court. But it shall not allow the Bank to take the possession & to sell of the property of the Applicants without following the due process of law strictly.

¶252

In view of the above discussions, I find that the 1^st Defendant has proceeded under the SARFAESI Act and rules for recovery of money from the Applicants but they have not followed the procedure as mentioned in the SARFAESI Act & Rules strictly and failed to rebut successfully the allegations made by the Applicants. Therefore, this Tribunal holds that the Applicants are entitled to get the reliefs as prayed for in SA No. 585/2024 .

¶253

In the result,

¶254

(a) SA No. 585/2024 is allowed. The Possession Notice dated 02.11.2023 issued by the 1^st Defendant is hereby set aside. Sale held on 31.08.2024 is not in accordance with law and since there is violation the Sale Notice dated 29.07.2024 is hereby set aside.

¶255

(b) Registered Sale Certificate Document No. 9139 of 2024 dated 11.09.2024 is also hereby set aside by this Tribunal.

¶256

(c) The 1^st Defendant is directed to refund the entire sale consideration amount paid by the Auction purchaser along with 4% of interest to the Auction purchaser from the date of deposit of money till the refund within one month from the date of receipt of copy of the Order.

¶257

(d) The Applicants shall make the payment of the amount incurred by the Auction Purchaser towards the Stamp duty and Registration charges within one month from the date of receipt of copy of the Order.

¶258

(e) The Applicants are also directed to pay the interest at the rate of 4% of the sale price to the 1^st Defendant from the date of payment of Sale

¶259

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¶260

SA No. 585/2024

¶261

price by the Auction Purchaser till the date of refund to the Auction Purchaser by the 1^st Defendant within one month from the date of receipt of copy of the Order.

¶262

(f) The Impugned Order passed by the Chief Judicial Magistrate, Madurai in Crl.M.P.No.143 of 2024 d ated 01.03.2024 is also hereby set aside.

¶263

(g) All the expenditures incurred in issuance of Possession Notice dated 02.11.2023, Impugned Order passed by Chief Judicial Magistrate, Madurai in Crl.M.P.No.143 of 2024 d ated 01.03.2024 and further all the expenditures incurred in respect of All Sale Notices & Registered Sale Certificate dated 11.09.2024 shall not be included in the loan account of the Applicants.

¶264

(h) The 1^st Defendant is at liberty to initiate fresh action against the Applicants for recovery of loan amount following strictly the SARFAESI Acts & Rules.

¶265

Consequently, all pending IAs (if any) are also disposed of. No costs.

¶266

Dictated to MTS (KK), taken down, transcribed, typed by him, corrected and pronounced by me in the Open Court in this the 24^th March 2026.

¶267

Sd/ -

¶268

(SEEMA SINHA) PRESIDING OFFICER

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Uploaded on 01.04.2026

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Tanishkaa Fashion v. Canara Bank

Case brief

What is this about?

What did the court decide?

Tanishkaa Fashion v. Canara Bank

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

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Cases cited

Statutes considered

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