Bank Of India vs Surendra Sah And Ors

R. D. Khare, Chairperson

The present appeal has been filed U/s 18 of The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short “SARFAESI Act”) against the judgment dated 05/01/2021 passed by DRT, Patna, whereby the S.A No. 87/2018 filed by the respondents-borrowers was dismissed.

The brief facts of the present case are that the respondent No.1 is proprietor of M/s Maa Janki Traders, who was granted financial assistance by the appellant-Bank, to which respondent Nos. 2 and 3 stood as a joint guarantor and executed a Letter of Guarantee dated 30.08.2014 in favour of the appellant-Bank. Since the borrowers did not maintain the financial discipline, therefore, the account was classified as NPA on 31.03.2017 and Demand Notice under Section 13(2) of the SARFEASI Act was issued on 20.06.2017 for a sum of Rs. 25,94,147.90. Since the borrowers did not pay any heed to the said demand, therefore, the possession notice dated 23.11.2017 was issued under Section 13(4) of the said Act and the same was published in the newspapers on 25.11.2017.Thereafter, the appellant-Bank issued auction sale notice dated 20.02.2018 to the borrowers scheduling the auction to be held on 28.03.2018. The said auction sale notice was challenged by the borrowers before the Hon’ble High Court by filing CWJC No. 4559 of 2018. Since the said auction could not take place for want of bidders, therefore, the said petition was disposed off by the Hon’ble High Court vide order dated 27.03.2018 with liberty to the petitioner (S.A. applicant) to move before the Tribunal below.

Thereafter, the appellant-Bank again issued sale notice, which was published in the newspapers on 21.04.2018 scheduling the auction of the property in question on 30.05.2018. The borrowers filed the S.A. before the Tribunal below on 21.05.2018 challenging the entire proceedings of the appellant-Bank including the demand notice dated 22.06.2017, possession noticed dated 23.11.2017 and the auction sale notice dated 21.04.2018.

It appears that in the meantime, the borrowers had filed an application dated 24.02.2018 under Section 13(3) of the SARFAESI Act before the appellant-Bank.

The Tribunal below vide order impugned allowed the S.A. of the borrowers and set aside the entire proceedings of the appellant-Bank. Being aggrieved by the said order, the present appeal has been filed by the appellant-Bank.

Learned counsel for the appellant further submitted that the finding of the DRT, Patna in the order impugned that the mandatory 60 days’ notice will be counted from the date of notice is not correct in view of the provisions of law as well as the judgment of the Hon’ble Patna High Court in CWJC No. 15468 of 2012 – M/s Tirupati Storage and Allied Pvt. Ltd. Vs. The United Commercial Bank decided on 19.10.2012. The learned counsel has referred to para 15 of the said judgment, wherein it has been held that 60 days would be counted from the date of service of notice, therefore, the finding of the Tribunal below is bad in law. It was, therefore, prayed that the order impugned may be set aside and the appeal may be allowed.

Learned counsel for the respondent-Borrower submitted that the recovery certificate has not yet been withdrawn by the appellant-Bank. As such two parallel proceedings are going on by the Bank which is not sustainable in the eye of law. The learned counsel further submitted that the appellant-Bank has not followed the mandatory provisions of the SARFAESI Act and Rules made there under with regard to the service of notices. As such the Tribunal below has rightly allowed the S.A. Hence the order impugned does not call for any interference by this Tribunal. It was, therefore, prayed that the appeal may be dismissed.

Learned counsel for the appellant submitted that the said proceedings are separate, which is pending before the Tribunal below and the issue involved in the present case is different.

Learned counsel for the respondent-Auction Purchaser has adopted the arguments as raised by the learned counsel for the appellant.

Heard the learned counsels for the parties and considered the material available on record.

The core question involved in the present case is, as to whether 60 days would be counted from the date of notice or from the date of service of notice?

It is to be seen that a demand notice under section 13(2) of the SARFAESI Act was issued on 22.06.2017 to the borrowers, which are placed at page no. 45 to 50 of the paper book and the same were dispatched to the S.A. applicant and the respondent no. 3-Mahesh Kumar on 30.08.2017 through registered post. Copies of the postal receipts are placed at page no. 51 and 52 of the memo of appeal. As such the said notices were served after 69 days. The symbolic possession was taken by the appellant-Bank on 23.11.2017 pursuant to the possession notice dated 23.11.2017, which was affixed and published in the newspapers. Copies of the possession notice and its affixation and paper publication are placed at page no. 53 to 58 of the paper book. As such the possession of the property in question was taken by the appellant-Bank after 82 days. If the possession had been taken prior to expiry of 60 days by issuing the said possession notice under section 13(4) of the SARFAESI from the date of demand notice, the matter would have been otherwise. The purpose of the enactment is that if any borrower makes any default in repayment of any secured debt or any installment thereof and his account in respect of such debt is classified by the secured creditor as non performing asset, then the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within 60 days from the date of notice, failing which the secured creditor shall be entitled to exercise all or any of the rights under sub-section 4 of section 13 of the SARFAESI Act. In the present case, it is admitted that the demand notice was prepared on 20.06.2017 and the same was dispatched on 30.08.2017 through registered post, but the borrower has clearly been given the time more than the time as prescribed in the Act and Rules made thereunder to discharge his liability. The responsibility of compliance of any notice by the person concerned starts from the date of knowledge or service of notice. In the case in hand, the demand notice was sent to the borrower on 30.08.2017 and the measure under section 13(4) of the SARFAESI Act was taken on 23.11.2017. As such complete 60 days was given to the borrower to discharge his liability. The said period runs from the date of service of notice. This view is fortified by the Hon’ble High Court, Patna in the matter of M/s Tirupati Storage and Allied Pvt. Ltd. Vs. The United Commercial Bank (Supra), wherein it has been held that “The Demand Notice has to be served upon the borrower, strictly in the manner prescribed in Rule 3 of the said Rules and the sixty days period, for the borrower to discharge in full his liability, starts running only from the date of service of such notice, and not from any earlier date. It has further been held that “expiry of sixty days from such service of notice is a precondition for initiation of a proceeding by a secured creditor under sub-section”. Thus, the finding of the Tribunal below that the mandatory 60 days’ time will run from the date of demand notice and if the same is served after 60 days, the whole purpose of issuing demand notice will be futile, is erroneous.

So far as the possession notice is concerned, the same was issued on 23.11.2017 and affixed on the conspicuous part of the property in question on the same day. The said notice was sent to the borrowers through registered post and was also published in two leading newspapers on 25.11.2017. As such, it cannot be said that the borrowers were not aware of the symbolic possession taken by the Bank. However, the signatures of respondents No. 2 and 3 are on the copy of the possession notice itself. As such there is no illegality or infirmity in the service and publication of possession notice.

In view of the above, the order impugned is set aside and the appeal is allowed with no order as to costs.

A copy of this judgment be sent to the parties as well as to the DRT concerned and be also uploaded on e-DRT portal.