Canara Bank vs M/s Antriksh Builders & Developers Pvt. Ltd. & Ors.

JUSTICE R. D. KHARE, CHAIRPERSON

The present appeal has been filed under section 18 of The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short "SARFAESI Act") against the judgment dated 14.09.2023 passed by DRT, Lucknow, whereby the S.A No. 575/2022 filed by the respondent no. 1 has been allowed.

Brief facts of the matter are that the respondent no. 1 is a private limited company, which was granted certain credit facilities by the appellant-Bank. In order to secure the same, the respondents no. 2 & 3 had executed and signed various loan documents in favour of the appellant-Bank on 05.06.2014. In addition to it, the respondents no. 2, 3 & 4 have also executed guarantee agreement on 07.05.2014 to secure the said facility and respondent no. 4 through its directors respondents no. 2 & 3 also stood as guarantor by signing and executing undertaking on 17.04.2014. Further, the respondent no. 1 through its directors created equitable mortgage over its property by depositing original title deed with the Bank. Since the borrowers did not adhere to the terms of the loan agreements, therefore, their accounts were classified as NPA on 31.03.2016 and a demand notice dated 22.04.2016 u/s 13(2) of the SARFAESI Act was issued for a sum of Rs.2,22,30,055.94. Since the borrowers did not pay any heed to the said demand, therefore, the possession notice u/s 13(4) of the said Act was issued and symbolic possession of the property in question was taken by the Bank. Thereafter, the auction sale notice was issued by the Bank on 30.06.2022 scheduling the auction of the property in question on 05.08.2022 after obtaining the valuation report dated 17.06.2022 from its approved valuer. The property was sold in favour of the respondent no. 5. In the meantime, the appellant-Bank obtained on order dated 04.08.2022 from the ADM, Meerut u/s 14 of the SARFAESI Act.

The respondent no. 1-borrower has challenged the entire proceedings of the appellant-bank before the Tribunal below by filing S.A. No. 575/2022, which has been allowed by the Tribunal below vide order impugned by setting aside the possession notice dated 16.07.2016, auction sale dated 05.08.2022 pursuant to the sale notice dated 30.06.2022 and the sale certificate if any issued in favour of the auction purchaser and further the respondent-bank was directed to restore the physical possession of the property to the S.A. applicants and also the respondent-bank was directed for refund of the auction amount to the auction purchaser along with interest applicable to the FDR only after taking back the original sale certificate. Being aggrieved by the said order, the present appeal has been filed by the appellant-Bank.

Learned counsel for the appellant-Bank submitted that the Tribunal below vide order impugned has quashed the entire proceedings initiated under the SARFAESI Act including the auction sale notice on the ground that Bank has failed to prove the service of possession notice and sale notice to one of the guarantors, namely Seema Mittal and the corporate guarantor M/s Rishabh Heights Pvt. Ltd.

Learned counsel further submitted that the possession notice dated 16.07.2016 issued u/s 13(4) was sent through speed post to the respondents on 18.07.2016 and the said notice was also sent to respondents no. 2 & 3, who are directors of respondent no. 4-company. It was further contended that the said notice was also published in the newspapers on 22.07.2016. In support of his contention, learned counsel has referred to annexure no. 5, 6 & 7 at page no. 364 to 371 of the memo of appeal, which are copies of postal receipts, photographs and publications of the same. It was thus contended that there is no violation of Rule 8(1) and 8(2) of the Rules, 2002.

Learned counsel also submitted that the auction sale notice was issued on 30.06.2022 and the auction was conducted on 05.08.2022. It was further contended that the said sale notice was also sent to the borrowers/guarantors through speed post on 01.07.2022, copies of postal receipts are filed as annexure no. 12 to the present appeal. As such a complete 30 days sale notice was served upon the respondents in compliance of Rule 8(6) of the Rules, 2002. It was further contended that the said sale notice was published in two newspapers on 03.07.2022 and the auction was conducted on 05.08.2022, thus Rule 9(1) of the said rules has also been complied with.

Learned counsel further submitted that the S.A. filed by the respondent-borrower was barred by time, but the copy of application for condonation of delay was never served upon the appellant and no opportunity was given to the appellant by passing the order on the application for condonation of delay. It was thus contended that on this ground also, the order impugned passed by the Tribunal below is not sustainable.

Learned counsel for the appellant submitted that he has filed a misc. application being I.A. No. 949/2025 praying that the appellant may be permitted not to press the appeal to the extent showing the respondent no. 4 as corporate guarantor. In this regard, learned counsel further submitted that the Bank has already filed an application before the Tribunal below for not pressing the outstanding amount against the respondent no. 4 in the O.A. no. 1200/2018 on 09.06.2025, which is still pending. It was thus contended that the said application may be allowed and respondent no. 4 may be permitted to be deleted from the array of parties of the memo of appeal.

It was lastly contended that the Tribunal below without considering the aforesaid facts has allowed the S.A. of the respondent-borrower and set aside the proceedings of the Bank. It was, therefore, prayed that the order impugned may be set aside and the appeal filed by the appellant may be allowed.

Learned counsel for the respondents-borrowers has drawn attention of this Court to the memo of parties and stated that the other respondents were not party before the Tribunal below, as the S.A. was filed only by the respondent no. 1-borrower. As such, the appeal may be dismissed due to mis-joinder of the parties in the appeal.

Learned counsel has drawn attention of this Court to page no. 144 of the memo of appeal, which is copy of demand notice dated 22.04.2016 under Section 13(2) of the SARFAESI Act addressed to only three persons, namely, Antriksh Builders, Sanjeev Mittal and Seema Mittal. The paragraph 5 of the said notice shows that the property, which has been mortgaged, is owned by M/s Antriksh Builders & Developers Pvt. Ltd. Learned counsel has next drawn attention of this Court to page no. 146 of the paper book, which are postal receipts dated 26.04.2016. It was also contended that the demand notice dated 22.04.2016 itself was issued on 26.04.2016. Learned counsel has further drawn attention of this Court to page no. 147 of the paper book, which is tracking report of the said dispatch, which shows that the said notice was sent was returned back on 29.04.2016. It is again reiterated that no notice was issued to the corporate guarantor, namely Rishabh Heights Pvt. Ltd. i.e. respondent no. 4.

Learned counsel has further referred to page no. 150 of the paper book, which is copy of possession notice dated 16.07.2016. Learned counsel also submitted that the said possession notice was published beyond seven days on 25.07.2016, which is clear violation of Rule 8(2) of the Rules, 2002.

Learned counsel for the respondent has further referred to page no. 364 of the paper book, which is copy of postal outward register containing the postal receipts. The said postal receipts show that two envelopes were sent to the respondent-borrower M/s Antriksh Builders, but the same were of different weight, one was of 14 grams and second was of 28 grams, but no such notice has ever been served upon the contesting respondents and it has not been sent by the authorized officer of the appellant-Bank.

Learned counsel has further drawn attention of this court to page no. 367 of the paper book, which is photographs and the same shows that the publication of the possession notice was affixed in open field of the property in question to show that the possession has been taken, but learned counsel has referred to page 10 of the paper book stating that the appellant-Bank itself has contended in para 5.13 of the memo of appeal that while taking symbolic possession of any land, the notice of possession cannot be affixed over the open land. It was further contended that the said notice was never served upon the respondents including the corporate guarantor respondent no. 4. In this regard, he has referred to page no. 150 & 364 of the memo of appeal, which are the copies of possession notice and postal receipts of the post department. It was thus contended that no possession notice was served upon the respondent no. 4. It was further contended that without serving the possession notice, the bank had directly affixed the possession notice on the land of corporate guarantor M/s Rishabh Heights Pvt. Ltd. It was thus contended that the Bank has failed to comply with Rule 8(1) of the Rules, 2002 also.

Learned counsel also submitted that no auction sale notice was served upon the respondents no. 3 & 4, as no tracking report has been placed on record before the Tribunal below. It was further contended that the said sale notice was published in the newspapers on 03.07.2022, in which the property in question has been shown in the name of respondent no. 4-corporate guarantor, whereas the demand and possession notices were not addressed to the said respondent.

The learned counsel has referred to page no. 372 of the paper book, which is copy of auction sale notice dated 30.06.2022 and the said notice is addressed only to three persons, namely, M/s Antriksh Builders, secondly Shri Sanjeev Mittal and thirdly Smt. Seema Mittal. It was further contended that in the description of the said notice, it has been mentioned that the property in question belongs to the respondent no. 1-M/s Antriksh Builders and Developers Pvt. Ltd, but in the publication of the said notice, the Bank has shown the property in the name of Rishabh Heights, Sanjeev Mittal and Smt. Seema Mittal. It was thus contended that there is irregularity in service of the sale notice as provided under Rule 3 of the Rules, 2002. As such the Tribunal below has rightly set aside the proceedings of the Bank initiated under the SARFAESI Act vide order impugned, hence the same is not required to be interfered with by this Tribunal. It was, therefore, prayed that the present appeal may be dismissed with heavy costs.

Learned counsel for the respondent-auction purchaser has adopted the arguments as advanced by the learned counsel for the appellant-Bank adding further that the respondent no. 5 is the successful auction purchaser in auction sale dated 05.08.2022 and has deposited the entire sale consideration in accordance with the provisions of the Act and Rules made thereunder. It was, therefore, prayed that the order impugned may be set aside and the appeal filed by the appellant may be allowed.

Having heard the learned counsels for the parties and considering the material available on record, undisputedly, the respondent no.1-company was granted certain credit facilities, for which the respondents no. 2 to 4 stood as guarantors.

In the present case, it is to be seen, as to whether the Tribunal below vide order impugned has rightly set aside the SARFAESI proceedings of the Bank or not?

The contention of the respondents-borrowers that demand notice dated 22.04.2016 was not served upon the borrowers is not tenable. Tribunal below vide order impugned has already held that the demand notice dated 22.04.2016 was served upon the borrowers, which has never been challenged by the respondents-borrowers, therefore, the same has attained finality.

So far as the compliance of Rules 8(1) & 8(2) of the Rules, 2002 is concerned, it is to be seen that the possession notice was issued on 16.07.2016, which was affixed, served and published in the newspapers. The copy of possession notice is placed at page no. 365 and postal receipts, through which the same was sent to the borrowers, is at page no. 364 of the paper book. From the postal receipts, it is clear that the possession notice was sent through speed post on 18.07.2016 to respondents no. 1, 2 & 3. Thus it is clear that no notice was sent/served upon the respondent no. 4, who is guarantor to the loan advanced in favour of the respondent no. 1-company. As such there is violation of Rule 8(1) of the Rules, 2002. The affixations of the said notice are at page no. 367 & 368. Both the pages are different from each other. The page no. 367 contains the photograph of two persons, who are standing on the land in question along with notice and paper cuttings, but the same are not legible, therefore, the date of pasting, name and place of the property cannot be ascertained, on which date and place, the said photograph was drawn-up. The page no. 368 is only photograph of land having greenery as well as notice and a banner containing the name "Land of Rishabh Heights Ltd., project coming soon". From the said page, it can be inferred that the possession notice was affixed at the property of the respondent no. 4, but the admitted fact is that no possession notice was served upon it, because the appellant-Bank has neither filed any postal receipts nor any document, which may show that the possession notice was ever served upon the respondent no. 4. It is also to be noted that the appellant-Bank had not filed any postal receipts before the Tribunal below with regard to service of possession notice despite being given opportunity, meaning thereby the postal receipts, through which the respondents no. 1 to 3 were served with the possession notice, have directly been filed by the Bank before this Tribunal, which is not permissible in law. Thus the Tribunal below has rightly held that there is violation of Rule 8(1) of the Rules, 2002.

So far as the service of sale notice dated 30.06.2022 is concerned, it transpires that the said notice was dispatched on 01.07.2022 through speed post. Copy of sale notice is placed at page no. 373 to 376, which shows that the same is only addressed to respondents no. 1 to 3, but the postal receipts, through which the said notice was dispatched to the respondents, are at page no. 248 to 257 of the paper book and the said postal receipts show that the sale notice was sent only to respondent no. 1 & 2. These documents were filed by the Bank along with its objection to the S.A. filed before the Tribunal below. Thus it is clear that the said sale notice was not sent/served upon the respondent no. 3 (Seema Mittal) and respondent no. 4 (corporate guarantor-M/s Rishabh Heights Pvt. Ltd.). As such the Tribunal below has rightly held that there is irregularity on part of the appellant-bank in service of sale notice.

It has been contended on behalf of the appellant-Bank that the S.A. filed by the respondent-borrower before the Tribunal below was barred by time, but the copy of application for condonation of delay was never served upon the appellant and no opportunity was given to the appellant by passing the order on the application for condonation of delay. The delay condonation application filed by the S.A. applicant-borrower was allowed by the Tribunal below vide order dated 04.10.2022. If there was any grievance of the appellant-Bank against the said order, it ought to have challenged the same, but the Bank did not do so. The present appeal has been filed against the final order, in which the interim order passed by the Tribunal below in the self same case cannot be permitted to be challenged by the appellant in the present appeal, as the said order has attained finality. Thus the said contention of the appellant is not tenable.

It is relevant to mention here that in order to overcome the abovementioned anomaly, an application being I.A. No. 949/2025 was filed by the appellant-Bank during the course of arguments, praying that the Bank may be permitted not to press the appeal to the extent of showing the respondent no. 4 as corporate guarantor. In this regard, it is stated that the appellant-Bank had filed an Original Application No. 1200/2018 before the Tribunal below, in which the respondent no. 4 was arrayed defendant no. 4. The Tribunal below vide judgment and decree dated 06.11.2019 has held the respondent no. 4 to be corporate guarantor to the financial facilities granted in favour of the respondent no. 1 and respondents no. 1 to 4 were directed to pay the dues of the Bank within 2 months from the date of the said decree, failing which the appellant-Bank will be entitled to recover the same from the secured assets, personal movable and immovable assets of the defendants no.1 to 4. Thus the respondents no. 1 to 4 are jointly and severely liable for the payment of the dues of the Bank. Hence the respondent no. 4 being corporate guarantor is a necessary party, which cannot be permitted to be absolved from its liability. However, it prima facie appears from the conduct of the Bank that in order to save the present sale only, it is ready to absolve the respondent no. 4 from its liability. It is settled principle of law that a party cannot be permitted to contest the case on his choice and benefits, as Bank itself had filed an Original Application against the said respondent and the same was decreed, but during the proceedings of the same, it appears that Bank would never have prayed before the Tribunal below that the said respondent may be deleted from the array of parties, as there are no dues against it. In the present case also, before commencement of the argument, Bank has not said so, but when the appellant-Bank felt any apprehension of losing its case, then the present application, which cannot be permitted at this stage. Hence the same is rejected.

In view of the discussions as held above, the order impugned does not call for any interference by this Tribunal. Consequently, the present appeal deserves dismissal. Hence, the same is dismissed with no order as to costs.

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