Mrs. Biji Jai & Anr. vs The Authorised Officer, CSB Bank Ltd. & Ors.

This appeal is filed under Section 18 of the SARFAESI Act, against the order of the Learned Presiding Officer, DRT-I, Ernakulam dated 23.1.2025 passed in SA No.9/2021.

Appellants, as applicants filed SA No.9/2021 on the file of DRT-I, Ernakulam, challenging the measures taken under the SARFAESI Act, more specifically, Annexure-A4, Possession Notice issued under Section 13(4) of the SARFAESI Act, Annexure A1, Demand Notice, Annexure A20, E-Auction Sale Notice, Annexure-A11, order of the Learned ACJM, Ernakulam, Annexure A12, interim report of the Advocate commissioner and to declare the sale conducted by the respondents on 15.9.2022 as invalid, null and void ab-inito and for other consequential and incidental reliefs.

The case of the appellants in brief is that, they availed loan to the tune of Rs.40.00 lakhs from the respondent bank. Though bank had taken title deed of 2.43 ares in Survey No.73/2B of Edappally North Village together with building owned by the first appellant, the said property is not a secured asset. Reason is that no registered document had been executed for creation/charge. Appellants were regularly paying the loan instalments. However, with mala fide intention and without following the decisions of Hon’ble Supreme Court and Hon’ble High Court, respondent bank classified the loan account as NPA on 25.2.2020. After classifying the loan account as NPA, respondent bank sent a demand notice on 30.5.2020 under Section 13(2) of the SARFAESI Act. That was objected by the objection dated 10.6.2020. Without considering the objection, respondent bank issued Possession Notice dated 5.12.2020. Respondent bank had also filed OA No.142/2020 against the appellants for recovery of loan amount.

Respondent bank approached additional CJM, Ernakulam under Section 14 of the SARFAESI Act for taking physical possession of the secured asset in MC No.17/2021 on the file of ACJM Court, Ernakulam. Material particulars had been suppressed for obtaining the said order. Order was passed without application of mind. Appellants in OP(DRT) No.17/2022 approached the Hon’ble High Court of Kerala. Despite that, respondent bank dispossessed the appellants from the secured asset on 12.1.2022 forcibly with the help of the advocate commissioner. Hon’ble High Court of Kerala vide its order on 27.1.2022 directed the respondents 1 and 2 to consider the proposal of OTS, if any, submitted by the appellants. Appellants submitted OTS on 4.2.2022, but that was rejected by the respondents. Appellants, therefore, withdrew OP (DRT) No.17/2022 and filed OP (DRT) No.187/2022, challenging the dispossession from the secured asset.

Meanwhile, respondent bank issued E-Auction Sale Notice dated 22.3.2022 without following the mandatory procedures . It is submitted that in the secured asset there exists a four storied pucca RCC building with super built up area of 10,000 square feet in the property having a total extent of 3.64 ares. However, in the E-Auction sale notice, total extent was shown as only 3.13 ares. Property is not properly described giving details of the measurement of the building in the property. Reserve price was fixed at Rs.1.40 crores.

As per OA No.142/2020, mortgage was for 2.43 ares but the sale notice refers about 3.13 ares. Respondent bank again issued E-Auction Sale Notice on 8.8.2022 scheduling the sale on 15.9.2022, quoting low reserve price of Rs.1.26 crores. Even in this notice, wrong extent was given as 3.13 ares instead of 3.64 ares and the building was not properly and distinctly described. As per the valuation report filed by the appellants’ valuer dated 10.9.2022, value of the property was Rs3,27,47,738/- but the bank’s valuer had given a report undervaluing the property. Though fair market value was fixed at Rs.1,75,00,000/-, total realizable value was given at Rs.1,57,50,000/-and forced/distress value was fixed at Rs.1,40,00,000/-. There is no justification for reducing the market value when market value, by itself, is low. Reserve price was reduced from Rs.1.40 crores to Rs.1.26 crores, in the successful sale attempt.

This case of the appellants is refuted by the respondent bank by filing counter affidavit, wherein it is pleaded that bank had taken measures under the SARFAESI Act after following the procedure meticulously. After classifying the account as NPA and after issuing demand notice, appellants had several opportunities to settle the loan account, but, they did not utilize them to settle the loan account. Therefore, further measures were taken. What was mortgaged by the appellants was only sold. Appellants mortgaged only 3.13 ares with land and building. After legally taking possession of the property, property was sold for the best price. Valuation Report was given by an approved valuer. On the other hand, valuation report produced by the appellants was given by a Chartered Engineer, who is not an approved valuer under the Wealth Tax Act.

By considering the pleadings, records produced and the submissions made by Learned Counsel appearing for parties, learned Presiding Officer, DRT-I, Ernakulam found that the objections raised by the appellants for the measures taken under the SARFAESI Act have no factual or legal basis and thus dismissed the SARFAESI application. Aggrieved against the order, the present appeal is filed by the appellants.

As stated already, though appellants had taken several grounds before the Tribunal, in the course of the hearing of the appeal, it was submitted that there had been no valid mortgage in respect of the property claimed to be a secured asset. Even as per the partition deed, first appellant has right only in respect of 2.13 ares. But the bank had proceeded to initiate measures against 3.13 ares of land with building. Some of the documents show that the total extent available is 3.64 ares. But, showing only 3.13 ares in the sale proceedings, respondent bank sold 3.64 ares. Certain discrepancies in the valuation report like, properties covered under a Partition Deed and a settlement deed were sought to be valued, but, valuation report refers only the partition deed and the property mentioned therein. When there had been a mortgage as per the case of the respondent bank, valuation report refers that ‘mortgage to be created’. Property was grossly undervalued. Learned Counsel for the appellants mostly focused on the aforesaid issues.

In reply to these submissions, Learned Counsel for the respondent bank submitted that sanction proceedings dated 27.5.2014 for sanctioning the loan for construction of apartments show that appellants are owners of 3.13 ares in Survey No.73/2B in Edappaly North Village, Kanayannoor Taluk. Value of the land was shown as Rs.60.00 lakhs. Valuer had given a certificate stating that though the extent of was shown as 3.64 ares in Survey No.73/2B, in all the previous transactions, actual extent available was only 3.13 ares. Legal opinion given by the bank at the time of availing loan facility mentions that partition deed refers to an extent as 2.43 ares in Survey No.73/2B but the extent available on ground was only 01.92 ares. Therefore, in the sanction proceeding, total extend of land was shown as 3.13 ares.

It is further submitted that in the partition deed dated 5.9.2012, executed among Mary, Bini Joseph and the first appellant, Biji alias Biji Jai. First appellant was allotted ‘A’ Schedule property. ‘A’ schedule property has an extent of 2.13 ares in Survey No.73/2B in Edapally north village. As per the settlement deed dated 3.12.2007, first appellant’s father, viz., Joseph settled an extent of 1.21 ares in the same Survey Number 73/2B, which is adjacent to the property allotted in the partition deed. Though total extent as per this document comes to 3.64 ares, land available on ground is only 3.13 ares. Thus, it is submitted that there is no discrepancy with regard to the extent of land available on ground and sold in the SARFAESI sale.

So far as the valuation is concerned, valuer of the respondent bank in his report dated 15.12.2021, valued the land at Rs.54,13,800/-, building at Rs.1,35,31,950/-. Value of the building after depreciation was given at Rs.1,21,11,096/-. Fair market value was Rs.1,75,24,896/-. Realizable value was given as Rs.1,57,50,000/-. Since it is forced/distress sale, its value was given at Rs.1,40,00,000/-. Reserve Price for first sale was Rs.1.40 crores. Since sale did not materialize, for the next sale, reserve price was reduced to Rs.1,26,00,000/-, as per bank’s guidelines. Property was sold for Rs.1,27,00,000/- for a right price.

Learned Counsel for auction purchasers submitted that they purchased the property on 15.9.2022 for a valid consideration of Rs.1.27 crores. Sale Certificate was issued on 17.3.2025 in their favour. Possession was also given to them. They invested huge amounts. Because of the pendency of this litigation, they are not able to make improvements / renovation in the property. While adopting the submissions made by Learned Counsel for respondents 1 and 2, they prayed for dismissal of this appeal.

I have considered the rival submissions and perused the records.

Availing of credit facility and its default, classification of loan account as NPA, issuance of demand notice followed by possession notice, measures taken under Section 14 of the SARFAESI Act for taking physical possession and sale of the property under Section 13 (4) of the SARFAESI Act are not denied. However, certain grounds had been raised in the SARFAESI application with regard to alleged non observance of mandatory procedures.

As already stated, main focus in this appeal is with regard to the extent of property sold, improper description of the property, undervaluation and insufficient price.

From the typed set of papers produced by the appellants, it is seen that for the demand notice dated 30.5.2020, claiming a sum of Rs.25,48,051/-, appellants sent a reply on 10.6.2020,challenging the authority of the Authorised Officer to issue notice, amount claimed, lack of details regarding payments made and defaulted amount. Other grounds taken are that property is not a secured asset, description of the details of the property is not correct and there is violation of Section 13(3) of the SARFAESI Act. Section 13(2) Notice describes the property offered as secured asset, wherein the extent of property measures 3.13.ares with residential building. Four boundaries are also given. There is no specific objection taken in the objection dated 10.6.2020 with regard to the extent available at 3.64 ares and the building available to the extent of 10,000 sq.ft. This Tribunal finds from the description of the property that sufficient description required for identification of the property is given. Objection dated 10.6.2020 was replied by the respondent bank refuting the allegations raised in the objection. Demand Notice was served and proof of service of demand notice was produced. Possession Notice dated 5.12.2020 and its service is proved by production of acknowledgment card, affixture and paper publication effected in English and vernacular language.

Bank filed MC No.17/2021 before the Addl. CJM, Ernakulam and obtained order in the application filed under Section 14 of the SARFAESI on 10.11.2021. No ground was made out to doubt the order. E-Auction Sale Notice dated 22.3.2022, fixing the sale on 29.4.2022 was issued. It appears that no sale had taken place in pursuance of the said sale notice. Therefore, bank issued sale notice on 8.8.2022 fixing the sale on 15.9.2022. Service of this notice is proved by production of postal acknowledgment cards, affixture and paper publication in English and vernacular language filed along with counter affidavit filed by the respondent bank.

In the details of immovable property offered as security along with loan application dated 14.5.2014, it is stated that the extent of 3.13 ares in Survey No.73/2B, Edappally North Village was offered as security. In the sanction proceeding dated 27.5.2014, same property is shown as property on which equitable mortgage was created. Respondent bank filed IA No.1357/2025 to receive additional documents i.e., loan application submitted by the appellants, receipts issued by the village officer and the report of the panel lawyer, as additional evidence. In view of the nature of dispute involved questioning the extent of the property mortgaged and sold, these documents are necessary documents for taking a just decision in this case. Therefore, application filed for receiving additional documents was allowed and aforesaid documents are received in evidence.

Letter for confirmation of deposit of title deed dated 27.5.2014 is also produced to confirm creation of mortgage on the basis of original partition deed and settlement deed. Copies of these documents are also produced for perusal of this Tribunal.

It is seen from the application filed by the first appellant dated 14.5.2014, first appellant offered an extent of 3.13 ares in Survey Number 73/2B as security. Receipts issued by the Village Officer dated 29.12.2012 and 9.5.2014 and its English translation shows that an extent of 01.21 ares and 01.92 ares Survey No.73/2B were assessed for Tax. Report of the panel lawyer of the respondent bank also confirms that 3.13 ares of land with improvements thereon in Survey No.73/2B was offered as security. It is made clear in this report that when partition deed refers about 2.43 ares in Survey Number 73/2B, the extent of land available with first appellant is 01.92 ares. Along with 01.21 ares got through settlement deed , the extent available with the first appellant was 3.13 ares. Thus, these documents clearly establish that first appellant had offered 3.13 ares as security and created security interest by equitable mortgage for availing the loan facility. Discrepancy between 3.64 ares and 3.13 ares is due to the fact that there is no extent available at 2.43 ares, as per the partition deed, but what was available was only 1.92 ares. Therefore, this Tribunal finds that there is no case made out to state that there is discrepancy in the extent of the property sold and larger extent of property was sold showing lesser extent in sale notice and in sale certificate. This contention is not true and as such, this contention is rejected.

As regards valuation of the property, admittedly, we have two valuation reports one produced by the appellants, taken subsequent to the sale of the property and the other valuation taken prior to sale by the bank.

As per the valuation report of the bank taken on 15.12.2021, valuer valued both land and building. Details of age of the building, construction, rooms and facilities available are given. As per this valuation report, valuer valued the land of 7.734 cents at Rs.7.00 lakh per cent at Rs.54,13,800/-. Building measuring 9021.3 sq.ft was valued at Rs.1500/- per square feet at Rs.1,35,31,950/-. Building was 6 years old when it was valued. After giving depreciation at Rs.14,20,854/-, depreciated value of the building was given as Rs.1,21,11,086/-. Thus, fair market value was fixed at Rs.1,75,24,896/-, realizable value was fixed at Rs.1,57,50,000/- and forced/distress value at Rs.1,40,00,000/- in the first sale attempt. Learned Counsel for the respondent bank claims that MECC Associates which gave the valuation report is an approved valuer under the Wealth Tax Act.

Valuation report of the appellants shows that the report was given by a Chartered Engineer. There is no indication that he is an approved valuer empowered to value the building and issue certificate. As per his valuation report, he valued the land at Rs.13.00 lakhs per cent, though he claims that market value of the land is between Rs.12.00 lakhs to 16.00 lakhs. Fair market value of the land was fixed at Rs.1.17 crores. Building measuring 9017.96 sq.ft. was valued at Rs.2,10,47,738/-. He adopted the value of Rs.2333.98 per sq.ft. for arriving at the value of Rs.2,10,47,738/-. This value after giving depreciation is at Rs.14,07,176.34p. Admittedly, there is a huge difference between the valuation given in the valuation report of the appellants and the respondent bank. Both valuation reports had not given any material to show what is the guideline value of the land, what is the market value of the land, except their statement, and they are not supported by any available sale deeds for the sale of the land and building during the relevant period. Not even the guideline value of the Government is produced. But, this Tribunal is constrained to proceed with the matter with the material available on record.

Of the two valuation reports available, valuation report given by the appellants is only a report given by the Chartered Engineer and not by an approved valuer under Wealth Tax Act. On the other hand, it is submitted by the Learned Counsel for the respondent bank that respondent bank obtained valuation report from the approved valuer. Therefore, this Tribunal is constrained to take the valuation report of the bank for disposal of this case. As per the this valuation report, forced/distress value was fixed at Rs.1.40 crores, which, in the nature of land and building is justifiable. On the basis of this valuation report, reserve price was fixed at Rs.1.40 crores during the first sale attempt. Since the first sale attempt had failed, during the next sale attempt, reserve price was fixed at Rs.1.26 crores and the property was sold for Rs.1.27 crores. Accordingly, sale certificate was issued to the auction purchaser. Unless manifest error in the valuation is shown by production of documents like comparable sale deeds, guideline value of the Government, appellants cannot challenge the valuation report produced by the bank.

Of course, there are some discrepancies in the valuation report, as pointed out by the Learned Counsel for the appellants like, mentioning about partition deed and description of the property thereon alone, leaving settlement deed and property described therein. When the property was already mortgaged, it was wrongly mentioned as “to be mortgaged”. All through the report, valuer considered the valuation of 3.13 ares and building thereon. Valuer omitting to mention the settlement deed and the property described in the settlement deed is not a fatal error, when he valued the settlement properties also. So also, the case of mentioning the property as ‘to be mortgaged’ when property was already mortgaged.

This Tribunal, on going through the records and submissions of Learned Counsel appearing for parties, found that the measures under the SARFAESI Act, had been taken after observing all the mandatory procedures that ended in sale of the property in favour of the auction purchasers viz., Respondents 3 and 4. Learned Presiding Officer has found that appellants have not made out any ground for setting side the SARFAESI measures and this Tribunal also finds no valid reason for reversing the decision of the Learned Presiding Officer, DRT-I, Ernakulam. In this view o the matter, order of the Learned Presiding Officer, DRT-I, Ernakulam dated 23.1.2025 passed in SA No.9/2021 is confirmed and this appeal is dismissed.

In the result, Appeal RA(SA) 101/2025 is dismissed.

Parties are directed to bear their own costs.

Pending IAs, if any, stand closed.