Allowed

Rakesh Jain and Another v. Icici Bank Limited and Another

DRT10 Mar 2026SA/67/2022

Case brief

AI extract

What is this about?

The Debt Recovery Tribunal quashed proceeding under the SARFAESI Act as the bank illegally classified loan accounts as NPA without notice and failed to prove proper service of Section 13(2) and 13(4) notices.

What did the court decide?

Proceedings initiated under the Act were quashed and the Securitization Application was allowed; respondents permitted to initiate fresh proceedings after compliance.

Rakesh Jain and Another versus Icici Bank Limited and Another — Company and Corporate | 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.67/2022

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Date of Institution: 13.04.2022 Date of Decision: 10.03.2026

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Sh. Rakesh Jain S/o Late. Sh. Narinder Kumar Jain, R/o D-108, Ward No. 54, Kitchlu Nagar, Ludhiana, District Ludhiana, Punjab

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Smt. Neeta Jain W/o Sh. Rakesh Jain, R/o House No. 108-D, Ward No.54, Kitchlu Nagar, Ludhiana, District Ludhiana, Punjab

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--Applicants

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Versus

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ICICI Bank Ltd., Feroze Gandhi Market, Ludhiana, District Ludhiana, Punjab through its Branch Head

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ICICI Bank Ltd., Shal Tower, 3^rd Floor, Plot No. 23, New Rohtak Road, New Delhi 110005 through its Authorised Officer

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--Respondents

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Argued by: Sh. C.S. Pasricha, Advocate for Applicants Sh. Sandeep Suri, Advocate for Respondents

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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 declare the classification of loan account as NPA illegal, to set aside notice under Section 13(2) of the Act dated 29.02.2020 and notice under Section 13(4) of the Act dated 10.11.2020 being illegal, arbitrary and against the provision of the Act.

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(2) It was stated in the application that applicants are owner in possession of the property i.e., a residential house bearing No. 108-B, H.B. No. 163 situated at Kitchlu Nagar, Ludhiana, Punjab measuring area of 400 sq. yards; that against the security of above said residential house, applicants had availed

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some loan facilities in the shape of Home Loan & Top UP Loan etc., on various dates from time to time on certain terms and conditions, repayable in equated monthly installments; that above said loans were disbursed to the applicants on various dates; that at the time of disbursement of loans, respondents have taken signatures on certain blank papers and also certain duly signed cheques for further security of the above said loans; that applicants have been paying about Rs.2,35,000/- as monthly installments of four loans and applicants have been depositing the EMIs of the above said loans regularly till February, 2018 and there was no default; that however, due to slump in the business, applicants suffered huge losses and could not pay the installments from March, 2018 to September, 2018; that respondents had classified the accounts of applicants as NPA without giving any prior notice to the applicants and issued notice under Section 13(2) of the Act calling upon the applicants to pay the entire amount of Rs.1,60,24,617/- outstanding as on 29.09.2018 within 60 days from the date of the notice; that thereafter, in the month of October, 2018 respondents had recovered the lapsed amount of EMIs from the account of the applicants maintained with Union Bank of India; that respondents have withdrawn the excess amount from the aforesaid account of the applicants without taking the express consent and permission of the applicants and even got transferred excess amount i.e., more than the arrears of EMIs; that account of the applicants became ‘standard’ on account of deposits of the overdue rather excess amount of the EMIs; that applicant No.1 was surprised to receive a summon from the Court of Sh. Vijay Kumar, Learned JMIC, Ludhiana under Section 138 of NI Act for facing trial for the offence of dishonor of cheques, in the complaint dated 20.12.2018 registered as COMA No. 13973/2018 titled as ‘ICICI Bank Vs. Rakesh Jain’; that since there was no EMI pending and the account was regular but respondents have misused the security cheques and filed aforesaid compliant, hence the applicants have filed an application i.e., CRM-M-2207 of 2021 for quashing of the summoning order dated 01.02.2019

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and the said complaint as well as the further proceedings in the said complaint; that applicants suffered huge losses in the business due to COVID 19 Pandemic and could not pay the EMIs of the loans and the applicants have been constantly in touch with the respondents seeking time for payment of the EMIs and bank has also been cooperating with the applicants and not taking any further action but despite various requests, respondents had not withdrawing the aforesaid complaint filed by it under Section 138 of the NI Act; that in the month of November, 2020, applicants came to know that some property dealer of the town has been contacted by some recovery agency claiming to be the Recovery/Enforcement agency for ICICI Bank for purchase of the residential house of the applicants and at this instance, the Authorised Officer of the respondents had proceeded further to take possession of the property for alienation of the same to the said property dealer; that applicants immediately approached the branch of the respondents and came to know from the employee of the bank that the SARFAESI proceedings have already been initiated against the applicants and possession notice dated 10.11.2020 has been issued; that applicants could manage to get the photocopy of the said possession notice; that perusal of the said possession notice reveals that the Authorised Officer has stated in the said notice that he had issued demand notice dated 29.02.2020 under Section 13(2) of the Act calling upon the borrower Sh. Rakesh Jain, Smt. Neeta & Sh. Rahul Jain to repay the amount mentioned in the notice being Rs.1,78,46,787/- within 60 days; that the alleged demand notice dated 29.02.2020 was never received by the applicants; that the whole world has been suffering from Covid 19 Pandemic and for precautionary measures, the Governments in the world had announced lock downs in their respective countries and in India on 23.03.2020; that therefore, there was no question of receiving the said demand notice; that Government of India and Reserve Bank of India had announced various schemes for re-habilitation and restructuring of the stressed accounts but the

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respondents instead of giving some relaxation on the payment of EMIs and restructuring or rehabilitation of account, proceeded further and issued the impugned notice, thereby violating the statutory guidelines of Reserve Bank of India. Therefore, it was prayed that the present SA may kindly be allowed.

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(3) Reply filed by respondents.

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(4) It was stated in the reply that applicants had availed loans under various agreements including Home Loans/Top up Loan facility etc.; that applicants are debtors of the respondents and mortgaged the property in possession i.e., residential house situated at Kitchlu Nagar, Ludhiana, Punjab as a security to avail the credit facilities; that due to non-payment of monthly dues, which was remained outstanding for over the period of 90 days, the loan account were classified as NPA on 30.11.2019 strictly in accordance with law; that the amounts, which were deposited by applicants with respondents were duly reflected in the statement of accounts; that thereafter, on 29.02.2020 respondents had issued notice under Section 13(2) of the Act to applicants through registered post with opportunity to pay all dues within 60 days from the receipt of the said notice; that the said notice was also published in two newspapers; that thereafter, on 10.11.2020 after giving due opportunity, respondents had proceeded under Section 13(4) of the Act and notice was issued to applicants; that after a detailed knowledge of current situation of the matter, applicants did come before respondents deliberately to clear all their dues; that accounts of the applicants are being NPA in the year 2019 itself therefore, applicants are not entitled to get any benefit under any schemes of the Reserve Bank of India on account of the Pandemic in March, 2020 and subsequently. Therefore, it was prayed that the present SA may kindly be dismissed.

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

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(6) I have heard arguments advanced by Sh. C.S. Pasricha, Advocate for Applicants and Sh. Sandeep Suri, Advocate for Respondents and gone through the record carefully.

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(7) Sh. C.S. Pasricha, Advocate argued that respondents had wrongly classified the accounts of applicants as NPA on 30.11.2019 because there was no 90 days default in continuation as per RBI Circular. It was further argued that before classifying the accounts as NPA on 30.11.2019 as per notice under Section 13(2) of the Act dated 29.02.2020, respondents had never issued any prior notice to applicants. Therefore, classification of loan accounts as NPA was illegal. It was further argued that loan accounts of applicants were classified as NPA on 30.11.2019 in violation of Section 2(1)(O) of the Act. It was further argued that it was mandatory on the part of the respondents to classify the accounts as sub-standard, doubtful or loss and intimate the same to the applicants before issuing the notice under Section 13(2) of the Act.

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(8) Per contra , Sh. Sandeep Suri, 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 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. C.S. Pasricha, Advocate has placed reliance upon the judgment passed by Hon’ble Jharkhand High Court in the matter M/s Stan Commodities Pvt. Ltd. Vs. Punjab and Sind Bank, 2009 AIR JHAR 14 (Annexure A-21) in which Hon’ble High Court has observed as under:

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

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

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

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

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“It is only when the account of the borrower became sub-standard, doubtful or total loss, then the account of a borrower becomes classifiable as NonPerforming Asset and it is only then the Act came into operation. Clause (o) of sub-section (1) of section 2 of the Act defines Non-Performing Asset which means an asset or account of a borrower which has been classified by the Bank as sub-standard, doubtful or loss asset. In the instant case the respondent bank in spite of the direction, has not placed on record the account of the borrower where the same was classified by the Manager of the respondent bank as sub-standard, doubtful or loss asset. Merely, on the basis of the aforesaid list, in our opinion it cannot be held that the account of the petitioner was declared as NPA legally.” (11) Admittedly, applicants were not informed before classifying their accounts as NPA and no opportunity of settlement of the controversy/doubts regarding classification of the assets were given. Therefore, the accounts of NPA classification cannot be said to be justified in light of above case laws cited by leaned counsel for applicants.

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(12) In the instant case the respondents have not placed on record the accounts of the borrowers where the same was classified by the Manager of the respondent bank as sub-standard, doubtful or loss asset. Therefore, in my opinion it cannot be said that

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the accounts of the applicants were declared as NPA legally in light of above case law cited by learned counsel for applicants.

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(13) Sh. C.S. Pasricha, Advocate further argued that notice under Section 13(2) of the Act dated 29.02.2020 was not served upon applicants as per Security Interest (Enforcement) Rules, 2002.

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(14) Per Contra , Sh. Sandeep Suri, Advocate argued that notice under Section 13(2) of the Act dated 29.02.2020 was duly served upon applicants as per the Rules. It was further argued that the said notice was duly sent through registered post and the said notice was duly published in two newspapers. It was further argued that copy of said notice is annexed as Annexure R-2 to the reply and copies of publication in two newspapers are annexed as Annexure R-3 to the reply. (15) It was mentioned in the reply to SA as well as argued by learned counsel for respondents that the above said notice was duly served upon applicants through registered post but it reveals from record that neither any receipts of registered post nor any track consignment record was filed by respondents along with reply to show that the notice in question which was allegedly sent by respondents was ever received by the applicants. Track consignment record is available w.e.f. January, 2013 and as per reply filed by respondents notice in question was sent in year 2020. Gone are the days when sending of registered post itself used to be enough for drawing the presumption of service against the addressee. There is hardly any scope for the same in view of the availability of the track consignment record. Track consignment record should have been produced to bring home the fact that the notice was duly served upon the applicants and concerned and that not being the position, this Tribunal refuses to draw presumption of service. There is no other type of personal service of the said notice upon the applicants, which was either pleaded or proved. (16) In light of above factual position, it is established that notice under Section 13(2) of the Act was issued but not proved served upon applicants as per Rules.

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(17) Sh. C.S. Pasricha, Advocate further argued that possession notice dated 10.11.2020 under Section 13(4) of the Act issued by respondents has not been served upon applicants as per Rules. It was further argued that the said notice was neither published in leading newspapers nor it was served through electronic mode.

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(18) Per Contra , Sh. Sandeep Suri, Advocate argued that possession notice dated 10.11.2020 was issued and served strictly in accordance with law. It was further argued that possession notice was also published in newspaper. Copy of the said publication is annexed as Annexure R-4.

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

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(20) Respondents had not disclosed regarding service of possession notice through electronic mode in the pleadings nor argued during the course of arguments. No copy of affixation of the said notice was filed by respondents, which can show that the said notice was affixed according to law.

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(21) It was neither argued nor mentioned in the reply as to whether the said notice was served upon applicants through registered post or not. Neither any receipts of registered post nor track consignment record was filed by respondents to show that the said notice was either served upon applicants through registered post. Except it, possession notice was to be served by publication in two leading newspapers but only cutting of one newspaper in which the possession notice was published was filed by the respondents.

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

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(23) No other point was argued/pressed.

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(24) After considering all facts, circumstances as well as after perusal of record and as discussed above, it clearly shows that accounts of applicants were classified as NPA illegally in contravention of the provision of the law and guidelines issued by Reserve Bank of India. Service of notice under Section 13(2) & 13(4) of the Act was also not proved served as per Rules.

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(25) Therefore, all proceedings initiated by the respondents under the Act are hereby quashed and SA is allowed. It is made clear that respondents may initiate fresh proceedings under the Act as per law. Record be consigned to record room after due compliance.

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Date: 10.03.2026

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Pronounced by me in the open Tribunal.

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(MRIDULESH KUMAR SINGH)

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Presiding Officer, DRT-III, Chandigarh

Rakesh Jain and Another v. Icici Bank Limited and Another

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Rakesh Jain and Another v. Icici Bank Limited and Another

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