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Judgment
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 (hereinafter referred to as "The SARFAESI Act") against the order dated 11.12.2024, whereby the S. A. No. 339/2022 filed by the respondent-borrower has been allowed.
Brief facts of the matter are that the respondent No. 1-firm was granted a cash credit facility of Rs. 25 lacs on 14.01.2025 by the appellant-Bank for the purpose of work of contractor and supplier against the mortgage of land situated at Bramhpura, Muzaffarpur. Since the respondent no. 1-borrower did not maintain the financial discipline, therefore, the account was classified as NPA on 31.03.2021 and a demand notice under section 13(2) of the SARFAESI Act was issued for a sum of Rs.28,07,601.26. Since the borrower did not pay any heed to the said demand, therefore, the symbolic possession of the property in question was taken by the Bank by taking recourse to section 13(4) of the SARFAESI Act and the possession notice was issued on 07.01.2022. The said notice was duly served upon the respondent-borrower and was also affixed at the conspicuous place of the property in question and was also published in two newspapers namely Prabhat Khaber and the Times of India. Thereafter the appellant-Bank issued a sale notice dated 22.08.2022 for auction of the property in question. The said sale notice was also published in two daily newspapers.
It appears that the aforesaid proceedings of the Bank were challenged by the respondent-borrower before the Hon'ble High Court at Patna by filing a Writ Petition being CWJC No. 15054/2022, which was dismissed as withdrawn by the Hon'ble High Court vide its order dated 24.11.2022. Thereafter, the respondent-borrower filed the present S.A. No. 339/2022 challenging the possession notice and sale notice issued by the Bank.
It transpires that the appellant-Bank obtained an order dated 21.02.2023 from the District Magistrate, Muzaffarpur under section 14 of the SARFAESI Act, pursuant to which the physical possession of the property in question was taken. However, the said order was challenged by the borrower by filing an interim application No. 166/2023 before the Tribunal below, which was allowed and the S.A. was amended accordingly. The Tribunal below vide order impugned has allowed the S.A. of the respondent No. 1-borrower and set-aside the possession notice and its all subsequent auctions directing the appellant-Bank to return the auction amount along with 10% simple interest. Being aggrieved by the said order, the present appeal has been filed by the appellant-bank.
Learned counsel for the appellant submitted that there was a clear and specific averment in the demand notice dated 08.07.2021 issued under section 13(2) of the Act about the redemption clause provided as per section 13(8) of the SARFAESI Act and the Rules framed thereunder. It was further submitted that despite service of demand notice, no effort was made by the respondent-borrower to seek redemption of the mortgaged property by depositing the outstanding amount of the Bank. It is also contended that the respondent also did not file any objection against the demand notice.
Learned counsel further submitted that after issuance of demand notice, the appellant-Bank proceeded under section 13(4) of the Act by taking symbolic possession of the mortgaged property by issuing a possession notice dated 07.01.2022 as per Rule 8(1) of the Security Interest (Enforcement) Rules 2002 and copy of the possession notice dated 07.01.2022 along with postal receipts placed as Annexure No. 3 to this appeal.
It was further contended on behalf of the appellant that the aforesaid possession notice was duly served upon the respondent-borrower and the same was also affixed at the conspicuous place of the mortgaged property as well as published in the two widely circulated daily newspapers namely "Prabhat Khabar" and the "The Times of India" and copy of photographs of the affixation of the possession notice and the newspapers are placed as Annexure No. 4 to this appeal. It was further contended that despite service of symbolic possession notice upon respondent-borrower, it did not make any effort to deposit the outstanding dues of the Bank and get the mortgaged property redeemed.
Learned counsel further submitted that the respondent-borrower had given an undertaking before the Hon'ble High Court to deposit 20% of the outstanding dues within a week and the remaining entire outstanding dues within three months, which is reflected in the order dated 07.11.2022 passed by the Hon'ble High Court and as such the respondent-borrower was granted an opportunity to deposit the amount as per their own undertaking and get the mortgaged property redeemed, but the respondent-borrower only deposited Rs. 7.00 lacs on 11.11.2022. It was thus contended that the respondent-borrower had got full opportunity to redeem the property in view of the order passed by the Hon'ble High Court, but they did not avail the same, hence the Tribunal below has erred in setting aside the entire SARFAESI action on the ground that the notice under section 13(4) was not having the redemption clause of section 13(8), hence it was contended that the order impugned is not sustainable. .
It was lastly contended that without setting aside the order of the District Magistrate passed under section 14 of the SARFAESI Act, the direction issued by the Tribunal below for the appellant-bank to handover the possession of the property in question within 30 days is against the Act and Rules made there under, as a general direction or an order to set-aside the entire SARFAESI action could not mechanically include the order passed by the District Magistrate under section 14 of the Act. It was therefore prayed that the order impugned may be set-aside and he appeal filed by the appellant may be allowed.
Learned counsel for the respondent-borrower submitted that the demand notice under section 13(2) and possession notice under section 13(4) of the SARFAESI Act were not delivered and the Bank also did not file any postal tracking report along with its written statement to the SA before the Tribunal below nor has the Bank referred to it in its present Appeal. It was further contended that the Hon'ble Patna High Court has held that presumption of a notice to be served under section 13(2) of the SARFAESI Act having a penal provision and capable of even dispossessing a person from his mortgaged property, cannot be so lightly inferred. It was further contended that the presumption of non-return of the registered cover, as envisaged under order V Rule 19-A of the Code of Civil Procedure ipso facto cannot be made applicable to the proceedings under SARFAESI Act in absence of such a provision made in the Act and Rules framed thereunder. It was also contended that the Hon'ble Division of Patna High Court in LPA No. 1475 of 2014 has affirmed the judgment passed by Hon'ble Single Judge and in view of the finding of Hon'ble Patna High Court, the Demand Notice as well as possession notice was dismissed for not having proved delivery of the same by way of postal tracking report. It was, therefore, prayed that the appeal filed by the appellant-Bank 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 he is bonafide purchaser of the property in question, as the entire sale consideration has been deposited with the appellant-Bank in accordance with 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.
I have considered the rival contentions of the learned counsels for the parties and perused the material available on record.
While going through the order impugned, it is found that the Tribunal below has held that the service of demand notice, possession notice and sale notice was made upon the respondent-borrower, but the possession notice was held to have not been issued as per appendix IV which mandatorily requires the averment of opportunity for redemption under section 13(8) of the SARFAESI Act.
The contention of the respondent-borrower that the demand notice was not served upon the borrowers, is not tenable. If the respondent-borrower was aggrieved by the finding of the Tribunal below that the demand notice was not served, they ought to have challenged the same by filing separate appeal before this Tribunal, but the respondent-borrower did not so, hence they cannot be permitted to agitate the said issue in the present appeal filed by the appellant-bank.
It is to be seen that after issuance of demand notice under section 13(2) of the SARFAESI Act, the possession notice under section 13(4) of the SARFAESI Act was issued on 07.01.2022 and the same was affixed at conspicuous place of the property in question, served upon the borrowers and published in the newspapers on 12.01.2022, copies of which are placed from page No. 50 to 56. Page No. 56 is the copy of possession notice and page No. 51 is the copy of postal receipts, by which the possession notice was sent to the borrower/guarantor/mortgagor. Page No. 53 and 54 are the copies of affixation of possession notice and Page No. 55 and 56 are the copies of publications of possession notice, thus the same was served, affixed and published in the newspapers in accordance with Rule 8(1) and (8(2) of the Rules, 2002, but the same was not issued as per Appendix IV, as there is no averment of redemption of section 13(8) of the SARFAESI Act, which is also admitted by the appellant-Bank in para 6 of its written submission. In the said para, it is stated "due to inadvertence and typographical mistakes, the redemption clause under section 13(8) of the Act could not be mentioned in the possession notice. In order to cover up this lacuna, the learned counsel for the appellant-Bank has stated that the borrower was given ample opportunity to redeem the property in question by the Hon'ble High Court, but the respondent-borrower did not comply the order of the Hon'ble High Court, hence non mentioning of averment of section 13(8) of the SARFAESI Act in the possession notice would not vitiate the entire proceedings of the SARFAESI Act. The said plea of the appellant-Bank is not tenable, because the statute gives opportunity to the borrower for redeeming the property at every stage of the proceedings under the SARFAESI Act, which cannot be curtailed by the Bank and each and every provisions of the Act and Rules made thereunder are to be complied with strictly by the Bank while proceeding for its recovery. Over and above to it, it is borne in mind that none compliance of order of the Hon'ble High Court by the respondent-borrower does not entitle the appellant-Bank violate/deviate the provisions of the Act and Rules made thereunder. Thus the Tribunal below has rightly set-aside the possession notice and its subsequent action vide order impugned. If the possession notice is found to be defective, the order passed by the District Magistrate under section 14 of the SARFAESI Act would automatically go away, because the proceeding of section 14 is subsequent action of section 13(4) of the SARFAESI Act.
In view of the discussions as recorded above, there is no infirmity or illegality in the order impugned, therefore, the same does not call for any interference by this Tribunal. Consequently, the appeal filed by the Bank 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.