Harpreet Singh Banga And Anr vs State Bank Of India And Anr

This order is being prepared while working from home for being signed and communicated to the parties because of the suspension of physical hearing of DRAT appeals due to spread of Corona Virus (Covid-19) in the entire country. This procedure for the preparation of orders by quasi judicial tribunals and their communication to the concerned litigants in place of formal pronouncement in open Court has been recognised by the Hon'ble Supreme Court in one of its judgments reported as AIR 2008 SC 2594, " State Bank of India and Ors. Vs. S.N.Goyal"(para 19) wherein it was observed that:-

".............While some quasi judicial tribunals fix a day for pronouncement and pronounce their orders on the day fixed, many quasi judicial authorities do not pronounce their orders. Some publish or notify their orders. Some prepare and sign the orders and communicate the same to the party concerned... "

These two appeals which are being disposed of by this common order arose out a common order dated 07.02.2020 passed by the Tribunal below(DRT) Tribunal below(DRT-I, Delhi) in Securitisation Application(S.A.) No. 198/2019 filed by Harpreet Singh who is appellant in Appeal No. 29/2020 and respondent in Appeal No. 35/2020 and who shall now onwards be referred to as 'the borrower', under Section 17(1) of SARFAESI Act after he had been dispossessed from his residential house no.D-615, Jal Vayu Towers, Main Dadri Road, Sector 47, NOIDA(U.P.)(hereinafter referred to as 'the property in question') by the officials of State Bank of India, which is the appellant in Appeal No. 35/2020 and respondent in the other appeal and which bank shall now onwards be referred as 'the secured creditor'.

The borrower had had mortgaged the property in question in favour of the secured creditor to secure the re- payment of housing loan of Rs. 50,26,04b5/- which had been sanctioned in his favour in the year 2013 by the secured creditor and which loan he had duly utilized for the purpose for which he had got it sanctioned)housing loan). After some months the borrower was granted further loan also and a third loan on account of insurance premium. That way the borrower had three loan accounts. The repayment of housing loan was agreed between the lender and the borrower to be by way of 240 equal monthly instalments starting from 14.06.2013. It is the common case of the parties that the borrower had paid instalments regularly till 15th August, 2015. As per the copies of statement of account placed on record from both the sides in respect of housing loan the borrower did not pay further fixed instalments regularly till July, 2016. That led to the issuance of a demand notice dated 15.07.2016 by the secured creditor under Section 13(2) of SARFAESI Act in which the borrower was informed that his loan accounts had been classified as Non Performing Asset(NPA) and further he was called upon to clear the entire outstanding dues of Rs. 63,11.505/- within the statutory period of sixty days failing which possession of the mortgaged property in question was threatened to be taken by invoking the provision of Section 13(4) of SARFAESI Act. The borrower did not pay the demanded amount within the period of sixty days, Accordingly, the secured creditor firsrtly took symbolical possession of the property in question 0n 11.11.2016 and thereafter on 24.09.2019 the secured creditor had taken physical possession also of the mortgaged house of the borrower Harpreet Singh Banga.

The borrower who had prior to the taking over of physical possession of his mortgaged house on 24.09.2019 not challenged before any forum the validity of demand notice dated 15.07.2016 served upon him under S ection 13(2) of SARFAESI Act not had he challenged the action of the secured creditor in taking symbolical possession of the property in question approached the DRT with a S.A. challenging his dispossession from the property in question which he had mortgaged with the secured creditor to secure the repayment of the loan which he had taken in the year 2013. In the S.A. the borrower mainly challenged his dispossession from the property in question on the ground that his loan account was not an NPA and although he had filed his replyto the demand notice under Section 13(2) of SARFAESI Act but the bank had not responded to that reply and further that he had made payments in advance and so his account ought to have been 'regular' and also that the bank had illegally taken over physical possession of the property in question without giving him any notice as was directed by the District Magistrate to be given while allowing bank's application under Section 14 of SARFAESI Act permitting taking over of possession of the property in question by the bank with police aid. It was also fairly pleaded in the S.A. that the appellant was paying instalments regularly till 206 but then due to certain difficulties he could not adhere to the schedule of instalments but he was making payments whenever possible. He pleaded that he paid Rs. three lacs on 14.03.2017, Rs. seven lacs on 08.06.2017 and Rs. twenty lacs on 26.03.2018 and thatr therefore his loan account was regular and the bank ought to have been lenient towards him when he was making substantial payments from time to time. The prayers made in the S.A. were to direct return of possession of the property in question to the appellant and for restraining the bank from putting his sole dwelling house to auction.

The secured creditor had resisted the S.A. by filing a reply thereto. It was denied that the loan account of the borrower was not NPA as claimed by him. It was pleaded that the borrower had been given many opportunities to clear the outstanding dues of the bank but he had failed to do that and had simply requesting the bank for deferment of process of taking over of possession of the property in question and assuring that he will be making payment to the bank but he never kept his promises. It was pleaded in para no.2 of the reply to the S.A. by the secured secured creditor that the borrower's account was 'declared NPA on 13.08.16'.

The borrower had argued before the DRT that this admission of the secured creditor that the loan account of the borrower was declared NPA on 13.08.2016 totally demolished the defence of the bank that there was no illegality in the measure taken under Section 13(4) of SARFAESI Act inasmuch as the statutory demand notice dated 15.07.2016 under Section 13(2) which notice has to precede initiation of measures under Section 13(4), became redundant and unless fresh demand notice under Section 13(2) was issued after declaration of the account as NPA on 13.08.2016 the entire action of the bank of taking possession of the mortgaged property in question was rendered ilIegal. These submissions were accepted by the learned DRT in the impugned order dated 07.02.2020 and bank was directed to return the possession of the property in question to the borrower. However, while so directing the bank the DRT also directed the borrower Harpreet Singh Banga to make further payment of ten lacs of rupees to the secured creditor(State Bank of India) and that is the direction with which only the borrower was aggrieved and so had challenged that direction only in his appeal filed before this appellate Tribunal(being Appeal No. 29/2020). While the secured creditor felt aggrieved with the view of the DRT that since the bank had claimed that borrower's account had been declared as NPA the earlier demand notice dated 15.07.2016 under Section 13(2) could not be relied upon by the bank for invoking Section 13(4) of SARFAESI Act for dispossessing the borrower from the house which he had mortgaged in favour of the bank.

The relevant portions from the impugned final order passed by the learned DRT are re-produced below:-

"2. The brief facts of the case are that the applicant herein claims that the action of the Respondent bank is illegal and unlawful in as much as:

(i) Account was not NPA.

(ii) The notice as directed by the Ld. DM was not given.

(iii) Inventory list was not prepared.

(iv) There was no independent witness of neighbours as required in Ld. DM's order.

(v) No reply was given by the Respondent bank, to objections raised by the applicant to the notice u/s 13(2) of the SARFAESI Act, 2002.

(vi) The applicant has already made payment of installments in advance and the account to have been upgraded.

It is stated that the applicant availed a Housing Loan of Rs.65,42,451/- on 14.05.2013, from the Respondent Bank, repayable in 240 EMIs of Rs.62,247.50 per month, to renovate the house, by way of transfer of loan from HDFC. The loan was regularly paid till 2016, where-after the schedule of repayment could not be adhered to. It is also stated that, after the notice dated 15.07.2016 issued by the Respondent Bank u/S 13(2) of SARFAESI Act, 2002 to pay a sum of Rs.63,11,505/-, ...................................................................

Notice on this SA were issued to the respondent bank; the respondent bank appeared through its counsel and filed the detailed reply to this SA stating therein that the account was declared NPA on 13.08.2016 ...............

In the present matter, on behalf of the applicant it is being contended that the account has wrongly been declared as NPA as the account was declared as NPA on 13.08.2016, whereas the notice under Section 13(2) of the SARFAESI Act, 2002 was issued on 15.07.2016 i.e. prior to declaration of the account as NPA. It is also being contended that certain amount has been deposited by the applicant after taking symbolic possession of the property in question by the respondent bank and advance EMIs have also been deposited by the applicant till January, 2021, but despite the said fact the respondent bank has forcefully taken the physical possession of the property in question without compliance of the order Ld. D.M., therefore, the entire action/measures of the respondent bank are illegal and mala fide one, accordingly, prayed for allowing the present securitization application.

On the other hand, Ld. Counsel for the respondent bank vehemently contended that the account was irregular, though, certain amount was paid by the applicant, therefore, the account was declared as NPA on 13.08.2016 and thereafter the possession of the property in question was taken by the respondent bank 24.09.2019. It is further contended on behalf of the respondent bank that once the account has been classified as NPA the applicant is not entitled for any relief. Accordingly, it has been prayed for dismissal of the present securitization application.

Heard and the record has been perused thoroughly. In the present matter, on behalf of the applicant herein copy of demand notice issued under Section 13(2) dated 15.07.2016 has been placed on record and the reply to S.A. as well as copy of O.A. has also been placed on record on behalf of the respondent bank, wherein the date of NPA has been mentioned as 13.08.2016. Apparently, three loans were sanctioned to the borrower company, wherein demand notice under Section 13(2) of the Act, 2002 was issued on 15.07.2016. Admittedly, there is no such averment on behalf of the respondent bank that this is typographical error or mistake in the date of issuance of the said notice. Rather, this fact is being repeated on behalf of the respondent bank in evidence as well as other documents........................

In sequel of the above said discussion, this Tribunal come to conclusion that the demand notice under Section 13(2) of SARFAESI Act itself is bad in law, accordingly, the subsequent actions/measures of the respondent bank are absolutely illegal and perverse one, hence, the same stands set-aside.

Resultantly, the SA stands allowed with no order to costs and the bank is directed to restore the possession of the property in question to the applicant herein subject to pre-condition of depositing another sum of Rs.10.0 lac (Rupees Ten Lac only) within one month. The above said amount shall be over and above the amount already paid, as such the payment already made, and subsequent to be paid as stated above, shall be adjusted towards principle amount and interest already accrued in the ratio of 50% (principle amount): 50% (interest accrued). Thereafter, the regular due instalments shall be payable by the applicant.(highlighting is by me)

Mr, Sanjiv Bhandari, learned counsel for the borrower submitted that the learned DRT was not at all justified in directing the borrower to pay a further sum of ten lacs to the bank as a condition for getting back the mortgaged property in question when the DRT itself had found the measure of taking possession of the mortgaged house by invoking the provision of Section 13(4) to be not in accordance with law since the notice under Section 13(2) had lost all its sanctity because of the bank claiming before the DRT that the loan account of the borrower had been declared as NPA on 13.08.2016. I am in full agreement with this submission of the learned counsel. Once the DRT itself had concluded that the notice dated 15.07.2016 under Section 13(2) became meaningless with the admission of the bank itself that borrower's account had been declared as NPA on 13.08.2016 there was no occasion for passing of a direction to the security applicant/borrower to pay a further payment of ten lacs to the bank towards partial re-payment of the loan which was payable in instalments.

The submission of Mr. A.K.Singh learned counsel for the secured creditor on the other hand was that the learned DRT ought to have examined the statement of account of the borrower to find out if the borrower had defaulted in paying instalments after 15.08.2016 which defaults were there and then ought to have held that the account of the borrower had slipped into the category of NPA accounts instead of relying upon the fact that on some occasions the bank had claimed that the account was declared as NPA on 13.08.2016 which was as a consequence of some mistake. Mr. Singh submitted that after receipt of demand notice dated 15.07.2016 the borrower had made some small payments and for that reason the computer system wrongly showed the loan account as NPA again on 13.08.2016 while the fact remains that after 15.08.2016 the borrower had not paid three consecutive instalments and in fact thereafter also no regular instalments were paid and so the loan account which had automatically slipped into the category of NPA accounts on the expiry of three months period after last payment of instalment on 15.07.2016 continued to remain NPA and no benefit of the computer mistake could be derived by the defaulting borrower even if subsequently he had made some consolidated payment based on which he was claiming that his instalments stood paid in advance for many months. These submissions however are not acceptable for the reason and as noted by the DRT also in the impugned order that the bank had not come out with any such pleas in its reply to the S.A.

Resultantly, appeal of the borrower is allowed and the impugned direction given to him to pay a sum of Rs. ten lacs to the bank as a pre-condition for getting back the possession of the property in question is set aside. He shall now get back the possession of his house without payment of ten lacs of rupees as directed by the learned DRT. That direction will however not debar the secured creditor from declaring his account as NPA in case of any fresh defaults in payment of instalments. The bank shall return the possession of the mortgaged property to the appellant now within a week. The appeal of the bank stands dismissed.