M. Anandabalaji vs Tamilnad Mercantile Bank Ltd

S. Ravi Kumar, Chairperson

All these three Appeals are filed against Order dated 03.03.2021 in different Securitisation Applications through separate Orders of DRT, Coimbatore. As lis is between same parties and Advocates of respective parties submitted common arguments, these three Appeals are disposed of through a common Order.

RA (SA) 43/2021 is preferred against Orders in SA 261/2019, which Securitisation Application is filed to set aside Sale conducted on 23.01.2019 and consequential steps in pursuance of Sale; RA (SA) 37/2022 is preferred against Orders in SA 216/2018, which is filed challenging Possession Notice dated 19.04.2018; and RA (SA) 38/2022 is filed against Orders in SA 416/2020, which is filed to set aside Orders of District Collector, Coimbatore, dated 16.08.2019.

Brief facts that are relevant to these Appeals are as follows:-

Appellant’s father availed loan from Respondent Bank in the year 2015 and said loan is classified as Non-Performing Asset (NPA) on 31.08.2017. Thereafter, Authorised Officer of Respondent Bank issued first Demand Notice under Section 13(2) of SARFAESI Act, 2002, on 27.09.2017 demanding a sum of Rs.1,60,05,920/-, due as on 31.08.2017. Bank issued second Demand Notice on 17.01.2018 demanding Rs.1,70,60,895/- as amount due as on 31.12.2017. As borrower has not discharged the demanded amount, Bank issued Possession Notice under Section 13(4) of SARFAESI Act, 2002, on 19.04.2018; challenging said Notice, Appellant herein filed SA 216/2018.

Bank issued first Sale Notice on 21.08.2018 fixing sale date as 28.09.2018; Appellant filed SA 388/2018 challenging said Sale Notice. Bank issued second Sale Notice on 21.12.2018 fixing e-auction on 23.01.2019 and that sale took place wherein 3rd Respondent in RA (SA) 43/2021 became a successful bidder and paid bid amount; questioning said sale, Appellant filed SA 261/2019.

Bank issued Sale Certificate in favour of Auction Purchaser which is registered on 12.06.2019 and thereafter Bank availed the provisions of Section 14 of SARFAESI Act, 2002, for taking physical possession to deliver the same to Auction Purchaser, and District Collector, Coimbatore, passed Order on 16.08.2019, against which Appellant filed SA 416/2020.

All these Securitisation Applications are resisted by both Bank and Auction Purchaser, and on a consideration of contentions and rival contentions of both parties, Tribunal below dismissed SA 261/2019, SA 216/2018 and 416/2020, challenging which, present Appeals are filed by Appellant.

Arguments are advanced on behalf of Appellant, Respondent Bank and Auction Purchaser.

It is not in dispute that original borrower is no more, Appellant is son of borrower, and 2nd Respondent in RA (SA) 43/2021, namely Mrs. Vidhya, is daughter of borrower. It is also not in dispute that all Securitization action including classifying loan account as NPA and issuing of Demand Notice, are subsequent to death of borrower. In addition to oral submissions, parties also filed Written Submissions.

Advocate for Appellant submitted that Possession Notice dated 19.04.2018 is not served on 2nd Respondent, who is also LR of borrower. It is further submitted property was sold for a meager amount without considering value of property. It is further submitted that Bank and Auction Purchaser colluded together in selling the property. It is further submitted that Order of District Collector is not in accordance with Section 14 of SARFAESI Act, 2002, as there is no reference about any Affidavit filed before him, which is mandatory as per Section 14 of SARFAESI Act, 2002. It is submitted that Bank took only symbolic possession and property is sold without taking physical possession. It is submitted that there was no reply from Bank for collusion alleged, for under valuation of property alleged and non service of Possession Notice alleged. He submitted, in spite of that, Tribunal below discarded objections of Appellant and dismissed Securitisation Applications, and Orders of Tribunal are contrary to law. It is submitted that as the allegations are not denied, Tribunal below ought to have accepted and allowed Securitisation Applications.

Advocate for Respondent Bank submitted that claim of Appellant is barred by time. He submitted that SA 261/2019 is filed on 20.05.2019 to set aside the sale held on 23.01.2019. He submitted that as per Section 17 of SARFAESI Act, 2002, Application has to be filed within 45 days from the date of Sale, as the same is not filed within time prescribed, claim is barred by time, on this ground alone, relief claimed are liable to be dismissed. It is further submitted various issues now raised in the Appeal, are not the issues raised in SA, therefore, Appellant cannot be allowed to agitate all those issues. It is submitted, only ground on which Sale dated 23.01.2019 challenged is alleged collusion between Bank and Auction Purchaser. It is submitted, no material is produced for valuation issue, and Valuation Report relied on by Appellant is subsequent to Sale. It is submitted that even sale deeds referred to and relied on by Appellant are of the year 2014, whereas sale took place in the year 2019. He further submitted that the contentions of Appellant that bid amount is not paid in accordance with Rules, is not at all correct, and entire sale consideration is paid within time prescribed under Rule 9(4) of Security Interest (Enforcement) Rules, 2002 (hereinafter called the Rules, in short). It is submitted that all the objections raised are without any substance, and there are no grounds to interfere with Orders of Tribunal below.

Advocate for Auction Purchaser submitted that Auction Purchaser, being in business of manufacturing of coconut oil, and has interest in purchasing residential property, and when he come across advertisement published about auction of property issued by Authorised Officer of Bank, he submitted sealed bids, thereafter duly complied with statutory provision. It is submitted that Auction Purchaser quoted a sum of Rs.2,93,25,000/-, which is the highest bid amount, and after declaring him as a successful bidder, he was directed to deposit 25% of bid amount, after deducting EMD, which he properly complied with. It is submitted Auction Purchaser requested Bank in writing to extend remaining period of three months, which was accepted, and within time granted, balance amount is paid. It is submitted, after receipt of entire sale consideration, Sale Certificate was issued on 12.06.2019 which was duly registered as document No.5254 of 2019 in the Office of Sub-registrar, Pollachi, and as Appellant has not delivered possession, despite Sale, Bank filed Petition under Section 14 of SARFAESI Act , 2002, before District Collector, Coimbatore, and said Application was contested by Appellant, and District Collector passed Orders on 16.08.2019 allowing Application filed under Section 14 of SARFAESI Act, 2002, empowering Tahsildhar, Pollachi to take physical possession of secured asset with assistance of Police. He submitted that Appellant caused all sorts of objections to Auction Purchaser preventing him from taking delivery of property, and after much difficulty, Auction Purchaser was put in possession on 25.04.2021, only after two years. It is submitted that Tribunal below rightly dismissed Securitisation Application SA 261/2019 and other Applications, and there are no grounds to interfere with Orders of DRT, Coimbator.

Out of three cases, SA 216/2018 (subject matter of RA (SA) 37/2022) is earlier in point of time, since this SA is filed on 01.06.2018. Said SA is filed challenging Possession Notice dated 19.04.2018. According to Advocate for Appellant, this Possession Notice is not served on the other LR namely sister of Appellant. It is also submitted that Rule 8 (1) of Rules, 2002, is not complied with.

On the other hand, Advocate for Respondent Bank submitted that there is no specific pleading in Securitisation Application as to the grounds on which Possession Notice is challenged, except saying that Notice issue under Section 13(4) of SARFAESI Act, 2002, is against the provisions of law, vague and illegal. He submitted, it is the bounden duty of Appellant to plead and prove that Authorised Officer of Bank has not followed the provisions of SARFAESI Act and Rules made there under in taking measures under Section 13(4) of SARFAESI Act, 2002. He submitted, in reply to Securitisation Application, Bank clarified that Authorised Officer took possession of mortgaged property on 19.04.2018 as per Section 13(4) of SARFAESI Act and Possession Notice is duly served on Appellant and Respondent No.2 and same were also published in ‘Sunday Times of India’ on 22.04.2018 and in ‘Dinakaran’ Tamil Daily on 22.04.2018.

I have perused Securitsation Application and Reply of Bank to Securitisation Application.

One of the objections of Appellant is that Respondent No.2, sister of Appellant, has not been served with Possession Notice, but, as seen from record, Appellant addressed a Letter to Bank dated 03.07.2018 stating that he is interested to settle the account of his father individually, without his sister’s co-operation and requested Bank to give him an opportunity to settle the matter by One Time Settlement (OTS).

In entire Securitisation Application, except saying that Section 13(4) Notice is against the provisions of law, vague and illegal, no other details are mentioned. As per Section 17 of SARFAESI Act, 2002, DRT is expected to consider whether any of the measures referred to in Section 13(4) taken by Secured Creditor for enforcement of security, are in accordance with the provisions of the Act and Rules made there under, by examining the facts and circumstances of the case and evidence produced by parties. When Appellant has not pleaded any fact, as to how the Bank has not followed the provisions of the Act and Rules made there under, and when Bank in its Reply assertively stated that Possession Notice is duly served both on Appellant and his sister, and also furnished the details of newspapers, in which publication is made, it is for the Appellant to rebut them, and having failed in it, any length of argument is of no use.

On a scrutiny of the material, it is clear that Appellant failed to substantiate that Possession Notice dated 19.04.2018, is not in accordance with the provisions of the Act and possession taken pursuant there to, is in violation of the Act and Rules made there under; having failed in it, it is not open to Appellant to contend that said Notice is liable to be set aside. Tribunal below examined thoroughly and came to a right conclusion.

Second Securitisation Application (which is the subject matter of SA 43/2021) SA 261/2019 is filed on 20.05.2019 challenging Auction Sale dated 23.01.2019, which is held in pursuance of Sale Notice dated 21.12.2018 and consequential steps. According to Advocate for Appellant, Authorised Officer has not obtained valuation as required under Rules, and property was sold in collusion. It is further submitted that Authorised Officer extended time to Auction Purchaser to pay 75% of bid amount in contravention of Rules 9(3) and 9(4) of the Rules, 2002. It is further submitted that Bank failed to produce the details of bidders participated in auction, and on that ground also, Sale is liable to be set aside.

On the other hand, Advocate for Bank submitted that the grounds urged during the course of arguments regarding valuation, non-production of list of bidders etc., are not raised in Securitisation Application, and only ground raised is collusion, which is not established, therefore, all these objections taken at appellate stage, cannot be countenanced. It is further submitted, valuation produced by Appellant is subsequent to Sale, and Tribunal below rightly dismissed the Application.

From the record, it is clear that, Bank issued Sale Notice dated 21.08.2018, but the same is not acted upon, and Bank again issued e-auction Sale Notice dated 21.12.2018, fixing Sale on 23.01.2019. One of the contentions of Appellant is that in earlier Sale Notice dated 21.08.2018, upset price fixed as Rs.3,25,25,000/-, but in Sale Notice dated 21.12.2018, upset price is fixed as Rs.2,92,75,000/-, and there is reduction of upset price by Rs.32,50,000/-, in a span of four months, for which there is no explanation.

According to Bank, earlier Sale Notice dated 21.08.2018, is not acted upon for want of bidders, and therefore, upset price was reduced by issuing fresh Sale Notice. When such a contention is raised, except saying that there is collusion, which is not supported by any material and evidence, contention of Appellant cannot be accepted.

In Securitisation Application, it is pleaded that Bank fixed auction on 23.01.2019, in a hurried manner, and in Sale Notice dated 21.12.2018, place of auction is fixed as Pollachi Branch, and that, Appellant visited said Branch to witness auction, but he was informed by Branch officials that no auction proceedings are conducted in the said premises. In the limitation para, Appellant contended that he came to know about auction dated 23.01.2019 only through Letter dated 20.04.2019 received on 30.04.2019 thereby the Application is filed within 45 days from receipt of Letter dated 20.04.2019. On a comparison of this and facts pleaded in para 13 of Securitisation Application, both are contradictory. When Appellant pleaded that he visited Pollachi Branch to witness the auction proceedings on 23.01.2019, his contention that he has no knowledge about auction dated 23.01.2019, and he came to know about it only through Letter 20.04.2019, cannot be believed at any stretch of imagination. Further, auction dated 23.01.2019 is an E-auction, and there will not be any occasion to mention the place of auction.

As seen from Auction Notice dated 21.12.2018, it is clear that said Notice is given for sale of secured asset “as is where is basis” for recovery of Rs.2,03,55,764/-, due as on 30.11.2018 to Tamilnad Mercantile Bank Limited, Pollachi Branch. But, nowhere it is stated in the said Notice that auction will be conducted at Pollachi Branch.

One of the contentions of Appellant is that Authorised Officer of Bank has not followed the Rules in respect of obtaining Valuation Certificate. As rightly pointed out by Advocate for Bank, no such plea is raised in Securitisation Application. As seen from Counter of Bank to this Securitisation Application, Sale Notice dated 21.12.2018 was served on Appellant on 27.12.2018 and that Sale Notice was published in Times of India and Dinakaran Tamil Dailies on 23.12.2018. These factual details are not rebutted or denied by Appellant, on the contrary, for the purpose of limitation, it is pleaded that Appellant came to know about auction dated 23.01.2019 only through letter dated 20.04.2019, which is an apparent lie. This letter dated 20.04.2019 is issued by Bank requesting Appellant to receive back surplus proceeds of Rs.73,84,204/-.

As seen from record, Appellant filed SA 388/2018 challenging Sale Notice dated 21.08.2018, in which he filed an Interim Application to stay the auction and when Tribunal below passed conditional Order to deposit a sum of Rs.64 Lakhs in two instalments, Appellant failed in complying said conditional Order. In the Counter Affidavit filed to Securitisation Application, these facts are pleaded and it is also pleaded that there were no bidders on 28.09.2018, for the Sale proposed as per Sale Notice dated 21.08.2018. By considering all these aspects, Tribunal below held that there are no merits in the Securitisation Application and it deserves to be dismissed.

Though  Appellant  referred  to  many  judgements  of various Hon’ble High Courts and Hon’ble Supreme Court, when the facts pleaded in SA are apparently contradictory and Application is filed beyond 45 days, those decisions, which are attached to Written Arguments, are no way helpful to Appellant, therefore, they are not referred to in this Order.

Third Securitisation Application (which is the subject matter of RA (SA) 38/2022) SA 416/2020 is filed with a relief to set aside Order of District Collection dated 16.08.2019.

Advocate for Appellant contended that District Collector has not referred to any Affidavit in its Order which is mandatory under Section 14 of SARFAESI Act, 2002, therefore, said order is not legal.

On the other hand, Advocate for Bank submitted, under Section 17 of SARFAESI Act, 2002, only measures can be challenged, but Order of District Collector cannot be challenged under Section 17 of SARFAESI Act, 2002, before DRT, and Tribunal below rightly rejected the Application.

As rightly pointed out by Advocate for Bank, under Section 17 of SARFAESI Act, 2002, only measures can be challenged, and taking possession by invoking Section 14 of SARFAESI Act, 2002, is also a measure, and if there is any illegality in taking possession under Section 14 of SARFAESI Act, that can be challenged, but not the Order of District Collector.

As seen from Securitisation Application the very relief is to set aside Order dated 16.08.2019 of District Collector, which is not available under the provisions of SARFAESI Act, 2002, on the other hand, there is a bar under Section 14(3) of SARFAESI Act, 2002. In view of the same, Tribunal below is right in dismissing the Application, and arguments of Advocate for Appellant with regard to correctness of Order of District Collector, cannot be countenanced.

On a overall consideration of entire material, I am of the considered view that Tribunal below is perfectly right in dismissing the Applications and there are absolutely no grounds to interfere with order dated 03.03.2021 in SA 416/2020.

As already referred to above, Tribunal below is also right in dismissing Securitisation Application SA 216/2018 and Securitisation Application SA 261/2019, and there are no grounds to interfere with said Orders.

For the reasons stated above, it is held that all the three Appeals are devoid of merits and are liable to be dismissed.

In the result: All the three Appeals RA (SA) 43/2021, RA (SA) 37/2022 and RA (SA) 38/2022 are dismissed, directing both parties to bear their own costs. All pending IAs, if any, stand closed.