Canara Bank vs M/s. Masani Reddy Poultry Farms & Ors.

THE APPELLATE TRIBUNAL :

Both the Appeals have arisen against a common judgment and order dated 17^th October, 2024 passed by Learned DRT-1 Hyderabad in S.A. No. 01 of 2022, hence are being decided by a common judgment.

Appeal No. 50 of 2025 is filed by the Auction purchaser namely M/s Shri Pita Sudershan Reddy while the Appeal No. 49 of 2025 is filed by the secured creditor i.e. Canara Bank.

Both the Appeals have been filed against a judgment and order dated 17^th October, 2024 passed by Learned DRT-1 Hyderabad allowing S.A. No. 01 of 2022 (M/s. Masani Reddy Poultry Farms versus Canara Bank and another) whereby Learned DRT set aside the auction sale in favour of the Auction Purchaser conducted on 15.02.2023 in pursuance of the auction Sale Notice dated 07.01.2023. Consequently, Bank was directed to refund the sale consideration to the auction purchaser with interest @ 6% p.a. simple from the date of deposit till the date of repayment.

As per pleadings of the parties, Securitisation Application under Section 17 of the SARFAESI Act, 2002 (hereinafter referred to as the ‘Act’) was filed by the borrowers, Respondent No. 1 with the assertions that he is a borrower of the Bank since 2013. Mortgage of the secured assets was created in favour of the Bank. Loan Account became irregular and Demand Notice and Possession Notice were issued by the secured creditor which were challenged by preferring S.A. No. 153 of 2019. S.A. was dismissed by the Learned DRT on 21.10.2019. Writ Petition No. 1564 of 2020 was preferred against the order which was allowed on 08.04.2019 by the Hon’ble High Court of Telangana.

Another Notice under Section 13(2) of the ‘Act’ demanding an amount of Rs.15,59,57,567/- was issued by the Bank on 22.07.2021. Objections under Section 13(3-A) of the SARFAESI Act, 2002 was filed on 18.09.2021 which was rejected on 04.10.2021. Possession Notice was issued on 25.11.2021 which was neither published nor served upon the borrower. Sale Notice was issued on 07.01.2023 which did not contain the reserve price and date of auction etc. Valuation Report was not obtained from the approved sale was conducted on 15.02.2023 and sale certificate was issued.

O.A. No. 661 of 2017 was filed by the Bank against the borrower. O.A. was allowed for an amount of Rs.9,36,73,279/- with interest @ 6% per annum pendente lite and future. The outstanding dues as on the date of Demand Notice dated 22.07.2021 is Rs. 11,47,49,760/-. Rs.12,34,61,381/- as on the date of auction Sale Notice dated 07.01.2023 while the auction Sale Notice was issued for an amount of Rs. 19,43,44,786/- as on 31.12.2022 which is against law.

The Respondent Bank filed the opposition stating that the Demand Notice was issued on 22.07.2021. Objection filed by the borrower was duly considered and replied. Possession Notice dated 25.11.2021 was duly issued and served and published in the newspapers. Redemption Notice was also issued to the borrower on 06.12.2021 but no effort was made for redemption of the Account. As per the order in O.A 661 of 2017, an amount of Rs.12,52,83,274.23 was due as on the date of Demand Notice and on the date of the auction i.e. on 15.02.2023, amount of Rs. 13,48,98,444.36 was due. Minor errors should not be a ground for setting aside the sale.

Auction purchaser also filed the response and adopted the contentions made by the Bank.

Learned DRT framed the following two issues for consideration.

Learned DRT placing reliance upon the judgment of the Hon’ble High Court of Allahabad in Ace Media Advertisers Pvt. Ltd. And Others versus Bank of Baroda and others, AIR 2009 All 120, held that there are discrepancies in the amount shown in the Demand Notice, Possession Notice as well as the E-auction Sale Notice. Learned DRT also held that there is no dispute regarding issuance of Demand Notice, Possession Notice, Sale Notice which were duly served upon the borrower. Accordingly, Learned DRT allowed this Securitisation Application by setting aside the Sale conducted by the Bank.

Feeling aggrieved by the impugned order, Bank as well as the Auction Purchaser preferred separate Appeals.

I have heard the Learned Counsel for the Bank as well as Auction Purchaser and the borrower and perused the records.

Learned Counsel for the Bank would submit that the finding regarding issuance of the Demand Notice, Possession Notice as well as E-Auction Sale Notice are recorded by the DRT in favour of the Bank which are not challenged. Hence, attained finality.

Learned Counsel further argued that the amounts mentioned in the notices although are different but no prejudice is caused to the borrower as the order in the O.A. proceedings was passed by the DRT which was well within the knowledge of the borrower. It is further submitted that at no point of time any objection is raised by the borrower regarding discrepancy in the amount in the notices. Neither in the objections under Section 13(3-A) of the SARFAESI Act, 2002 any such objection is raised nor at any stage such objections were raised. Rather, these petitions are being allowed for the first time in the S.A. It is further submitted that notices for redemption was also issued and served upon the borrower but they did not make any payment. First sale was conducted for an amount of Rs.5,01,81,000/- and Rs.2,12,53,000/- total Rs.7,14,34,000/- which is too low in comparison to the debt due against the borrower. It is further submitted that borrower has no intention to redeem the property. Learned Counsel for the Auction Purchaser also made the same submissions and alternatively submitted that the Appellant Auction Purchaser deposited the amount after availing the loan from the Banks wherein he is paying 12.75% interest but has been awarded only 6% interest by the Learned DRT.

Learned Counsel for the Respondents borrower submitted that impugned judgment suffers from material illegality and irregularity. It is submitted that the O.A. was decided against the borrower on 16.04.2019 for an amount of Rs.9,36,73,279/- with interest @ 6.00 % per annum simple. But the Demand Notice under Section 13(2) of the Act, Possession Notice as well as Sale Notice contains different amounts which is against law. Learned Counsel has placed reliance upon Ace Media Advertisers Pvt. Ltd. And Others (supra)

Admittedly, O.A. No. 661 of 2017 was filed by the Canara Bank against (i) M/s. Masani Reddy Poultry Farm and Feeds, rep by its proprietor Masani Venkateshhwar Reddy (ii) Smt. M. Seshamma, (iii) Sri M. Ravikumar Reddy and (iv) Sri M. Thirumaleswar Reddy which was allowed on contest for recovery of an amount of Rs.9,36,73,279/- with 6.00% simple interest on 16.04.2019. Thereafter, notice under Section 13(2) of the Act was issued by the Bank demanding an amount of Rs.15,59,57,567/- on 22.07.2021. Annexure annexed with the Notice would reflect that the amount of interest was calculated @12.75%. Thereafter, Possession Notice was issued on 25.11.2021 showing an amount of Rs.15,59,57,567/- demanded by the Bank in the Demand Notice dated 22.07.2021. In the notice for redemption, same amount is mentioned as in the Sale Notice dated 07.01.2023 the calculated dues as on 31.12.2022 were shown as Rs.19,43,44,786/.

In the reply dated 28.08.2023 filed by the Bank following break up is given: