M/s Naya Nagar Developers Private Limited vs The Assistant General Manager, State Bank Of India & Ors.

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 “the SARFAESI Act”) against the impugned order dated 28.03.2023 passed by the DRT, Ranchi, wherein the S.A. No. 17 of 2023 filed by the appellant has been dismissed.

Brief facts of the present case are that the appellant was granted a credit facility to the tune of Rs. 3.00 crores by the respondent-Bank in the year 2017 through its Director Sumanyu Bharadwaj, to which one Mr. Satya Narayan Singh stood as guarantor and created equitable mortgage over his property by depositing original title deed with the respondent-Bank. Since the borrowers did not adhere to the terms of the loan agreement, therefore, the account was classified as NPA on 27.09.2018 and a demand notice dated 03.10.2018 was issued u/s 13(2) of the SARFAESI Act. Since the appellant-borrower did not pay any heed to the said demand, therefore, the respondent-Bank issued possession notice dated 15.06.2019 and the same was published on 25.06.2019. Thereafter, the respondent-Bank issued sale notice dated 03.09.2022, which was sent to the borrowers on 07.09.2022 and the same was published on two newspapers on 08.09.2022, scheduling the auction of the property in question on 19.10.2022. The property was sold to respondent no. 3 for an amount of Rs.4.26 crores, which was informed to the borrowers vide letter dated 19.10.2022. The sale was confirmed vide letter dated 19.10.2022 by the respondent-Bank.

The appellant-borrower challenged the entire proceedings of the Bank by filing S.A. No. 17/2023 before the Tribunal below. The Tribunal below vide order impugned has dismissed the S.A. of the appellant. Being aggrieved by the said order, the present appeal has been filed by the appellant.

Learned counsel for the appellant submitted that there is violation of statutory provisions of Act and Rules made thereunder and has referred to para 14, which is at page No.5 of the reply of the respondent-Bank. Learned counsel further stated that the measure under Section 13(4) of the said Act was taken and the possession notice was issued by the Bank to the borrowers, which is at page No.45 of the reply of the respondent-Bank. It was also contended that perusal of reply of the Bank shows that the possession was taken by the Bank pursuant to the possession notice dated 15.06.2019 under Section 13(4), but the same was not served upon the appellant or any other borrowers and guarantors. Learned counsel has drawn attention of this Court to page No.47 of the reply of the respondent-Bank and has stated that the possession notice is to be issued by the Authorized Officer of the Bank, but the same has been issued on behalf of the Authorized Officer and not by the Authorized Officer, which is not permissible in law. It was also contended that the possession notices placed at page No.45, 48 and 51 are different to each other, as on top of the notices placed at page No. 48 and 51, the date of the same are mentioned as 15.06.2019, but the notice placed at page No.45 does not bear any date. It was also contended that in the second para of these notices, the Bank has stated as "the undersigned has taken possession of the property described herein below in exercise of powers conferred on him under sub-Section (4) of Section 13 of the Act read with rule 8 of the Security Interest (Enforcement) Rules, 2002 on this the 18^th day of June of the year 2019."

The learned counsel further submitted that the respondent-Bank has also not filed any postal receipts and no acknowledgment or any document, which may show that the possession notice has ever been served upon the appellant as well as the mortgagor and guarantor. Thus, it was contended that there is violation of Rule 8(1) of the Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as "the Rules, 2002").

Learned counsel has drawn attention of this Court to annexure No.3 at page No.58 onwards of the reply of the respondent-Bank, which is the valuation report dated 08.08.2022 and has referred to its page No.65, wherein the valuation of the property in question has been shown to be Rs.4,33,36,125.00/-, but without accepting the said valuation, the valuation has been reduced by the Branch Manager to Rs. 3,90,02,512.00/-, which could not be done.

Learned counsel further submitted that as per Rule 8(6) of the Rules, 2002, a 30 days' notice is to be sent by the Bank to the borrower and thereafter, if the sale of the property in question is being effected, by either inviting tenders from the public or by holding public auction, the secured creditor has to publish a public notice in two leading news papers. Learned counsel in this regard has drawn attention of this court to Annexure No.4 at Page no. 84 of the reply of the Bank, which is sale notice dated 07.09.2022, while notice under Rule 8(6) has been issued on 03.09.2022, which cannot be done. The said notice is at page No.90 of the reply of the respondent-Bank. Thus, the said notice was different proceeding to the notice appended as Annexure No.4 at page No.84 of the reply of the Respondent-Bank.

Learned counsel has drawn attention to this Court to Page No.91, 92 and 93 of the reply of the Bank, which are the publications of the sale notice and has stated that the date of possession has been mentioned as 18.6.2019 while in the pleadings it is recorded as 15.06.2019.

Learned counsel has drawn attention of this Court to annexure No. 5 at page No. 170 of the Paper Book, which is letter dated 29.11.2022 written by the respondent No.3-auction purchaser, wherein it is mentioned that the entire sale amount has been paid through Raj Construction Pvt. Ltd., which is separate legal entity as per Companies Act and if the amount is paid by the said Company, then sale certificate cannot be issued in the name of the respondent No.3, but in the present case, the sale certificate has been issued in the name of respondent No.3, which cannot be done.

Learned counsel has further drawn attention of this Court to page No.43 of the Paper Book, which is S.A. filed by the appellant. It was further contended that the array of parties of the said S.A. shows that Baidya Nath Rai was not party in the same. It was further contended that the Tribunal below vide its impugned order has arrayed Baidya Nath Rai as respondent No.3 without allowing the impleadment application prior to the judgment impugned.

It was further contended that in the order impugned, the Tribunal below has only recorded that the possession notice dated 15.06.2019 was issued and Bank put the secured assets on e-auction on 19.10.2022, but there is nothing on record as to whether the same was served or not. It was thus contended that there is violation of statutory Rules and law, which has been ignored by the Tribunal below. It was thus prayed that the order impugned may be set aside and the appeal may be allowed.

Learned counsel for the respondent-Bank has contended that equitable mortgage was created by the owner of the property in question, which is authenticated by annexure No.1 at page No.15 of the reply of the Bank and the relevant page is page No.17 of the said reply. Learned counsel has further referred to page No. 43 of the said reply and has stated that the said document also shows the name of owner of the property in question as Satyanarayan Singh. It was further contended that the mortgagor/owner Satyanarayan Singh has opted not to assail the proceedings of the Bank and he has admitted the proceedings of the Bank. It was further contended that all the notices were duly sent and received by Shri Satyanarayan Singh, which has not been disputed by him. The appellant in this case has been incorporated under the Companies Act.

13. Learned counsel further submitted that the present appeal had been filed by the appellant-Company through its Director Sumanyu Bhardwaj, who is a third party and is not the owner of the property in question and the proceedings accepted by the mortgagor cannot be assailed by a third party.

14. It was further contended that the Tribunal below has committed no illegality in allowing the impleadment application and has referred to page No.198 of the paper book, wherein it is stated that the auction purchaser joined the proceedings w.e.f. from 01.11.2022 and continued and they have never objected at any point of time. It was further contended that the arguments as advanced by the appellants have neither been pleaded in the present appeal nor anywhere before the Tribunal below, therefore, the same cannot be argued at this point of time.

15. Learned counsel for the responded Bank has relied upon a judgment passed by the Honorable Apex Court in Contempt Petition (C) no. 158-159 of 2024- Celir L.L.P. V/s Mr. Sumati Prasad Bafna and Others, Decided on 13.12.2025 and has referred to para 218 of the said judgment, in which it has been held that no sale can be set aside or interfered with unless the same is collusive, fraudulent or vitiated by inadequate pricing or under-bidding and mere irregularity or deviation from the Rule, which does not have any fundamental procedural error, cannot take away the foundation of authority for such proceeding. Learned counsel further submitted that the property in question was got valued from the approved valuer prior to issuance of sale notice dated 03.09.2022 and the valuer's report has been placed at page No. 58 to 68 of the reply filed by the Bank. As per the valuation report, the market value of the property in question was assessed to be Rs. 4,33,36,125.00, realization value is Rs. 3,90,02,512.50 and the distress value is Rs. 3,46,68,900.00 and thereafter, the sale notice was issued/served upon the borrowers. Thus, all the provisions of the Rules have been complied with by the respondent-Bank and there is no violation of any Rules and Act whatsoever.

It was lastly contended that the application under Section 17 was barred by limitation so far as the possession notice is concerned. He has referred to Page 4 of the order impugned, which is at page No. 196 of the paper book, thus it was contended that the possession notice is barred by limitation. It was, therefore, prayed that the appeal filed by the appellant 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 respondent-Bank adding further that in he is bonafide purchaser of the property in question and has deposited the entire sale consideration in accordance with the Act and Rules made thereunder.

I have considered the rival contentions of the learned counsels for the parties and perused the record.

It is to be seen that after issuance of demand notice, the respondent-bank issued possession notice to the borrowers on 15.06.2019 and the same was published in the newspapers on 25.06.2019. The copies of possession notices issued to the borrowers, mortgagers and guarantors are placed from page no. 44 to 57 of the reply of the respondent-Bank. Page No. 44, 47 and 50 are the copies of letter dated 21.06.2019, by which the possession notices dated 15.06.2019 were forwarded to the borrowers, but there is nothing on record, which may show that on which date the same were sent nor there is any postal receipts of the Post Office. In this regard, Rule 8(1) says as under:

From the above, it is crystal clear that firstly, the possession notice is to be delivered to the borrowers and secondly, the same is to be affixed at the outer door of the property in question or at the conspicuous place of the property in question, but in the present case, the page no. 44, 47 and 50 shows that the possession notice was forwarded through these letters on 21.06.2019. In this regard, the respondent-Bank has contended in para 14 of its reply that "measures u/s 13(4) of the Act were taken and accordingly a possession notice dated 15.06.2019 was issued to the borrowers/mortgagors by the authorized officer of the respondent-Bank. The said possession notice was also affixed on the conspicuous parts of the respective mortgaged properties by the Authorized Officer of the respondent-Bank and the same was also published by the Authorized Officer of the Respondent-bank in two widely circulated daily newspapers", but the same does not specify about the date of dispatch of the said notice to the borrowers.

It is also to be seen that the possession notice contains the date of its issuance as 15.06.2019, but the contents of second para of the said notice is contrary to the said date, as the said para says "the undersigned has taken possession of the property described herein below in exercise of powers conferred on him under sub-section (4) of section 13 of Act read with Rule 8 of the Security Interest (Enforcement) Rules, 2002 on this the 18th day of June of the year 2019." As per the said content of the possession notice, I am unable to understand, as on what date the symbolic possession of the property was taken, because the possession notice was issued on 15.06.2019, but the same says that the possession was taken on 18.06.2019, thus it can be inferred that the said notice was either issued in backdate or the possession was taken after issuance of the possession notice, but the same has not been clarified by the Bank either in its reply or in its argument. Thus it is held that there is non compliance of Rule 8(1) of the Rules, 2002.

It is further to be seen that the possession notice was published in the newspapers on 25.06.2019, copies of which are placed at page no. 56 and 57 of the reply of the Bank. If the date of issuance of possession notice is taken into consideration, the same was published beyond the period of 7 days, which violates Rule 8(2) of the Rules, 2002. However, there is no such document on record, except pasting of the possession notice at the property in question at page no. 54 of the reply of the Bank, which may authenticate the date of taking of symbolic possession of the property in question. The said page, which is stated to be affixation of possession notice at the property in question, does not contain either the date, place or any content of possession notice and there is only a photograph. The said photograph does not show, on which place it was drawn. As such the Bank has failed to comply with the Rule 8(2) of the Rules, 2002.

It is further stated that after obtaining the valuation report dated 07.08.2022, by which the market value of the property in question was assessed to be Rs.3,90,02,512/-, the respondent-bank issued sale notice dated 03.09.2022 scheduling the auction of the property in question on 19.10.2022, with the reserve price of Rs.3.90 crores and the same was published in the newspapers on 08.09.2022. The property was sold in favour of the respondent no. 3-Auction Purchaser. In this regard, it has been contended on behalf of the appellant that the sale notice was not served upon the borrowers. For this, the contents of 3^rd clause of para no. 15 at page no. 6 of the reply of the Bank is relevant to be quoted hereinbelow:

While going through the findings of the Tribunal below, it is found that the Tribunal below while passing the order impugned has not gone into the depth of the case and has dismissed the S.A. of the appellants simply stating that "it is apparent that respondent-Bank followed the procedure for putting the secured assets on e-auction." If the Tribunal had considered the matter in its right perspective, the result of the S.A. would have come otherwise. The DRT is a procedural court, therefore, it should go through each and every fact and evidence on record while adjudicating the matter finally, but in the present case, the Tribunal below did not do so.

The contention of the respondent-Bank that the S.A. was filed by the appellant beyond the period of limitation as prescribed under the Act is not tenable, because it ought to have been raised by the Bank before the Tribunal below, while the matter was being adjudicated, but it appears that the Bank did not do so. If the said issue was before the Tribunal below and the same was not decided while passing the order impugned, Bank ought to have challenged the same before the competent court. However, the said issue cannot be permitted to be raised by the Bank in the present appeal, which has been filed by the borrower, as there is no such prayer.

In view of the discussions as recorded above, the possession notice and its all subsequent actions of the respondent-Bank are set aside. Accordingly, the order impugned is also quashed and the appeal filed by the appellant is allowed with no order as to costs.

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