Mrs. S. Lalitha vs The Authorized Officer, Central Bank Of India & Ors.

The appellant filed SA 109/2013 to set aside the sale dated 07.03.2013 made by the first Respondent in favour of the Respondents 3 to 6 pursuant to the illegal auction conducted on 07.02.2013 in violation of Security Interest (Enforcement) Rules, 2002 (SIE Rules) on the file of DRT, Madurai.

After contest, SA 109/2013 was dismissed by Learned Presiding Officer, DRT, Madurai, on 07.07.2015. Dissatisfied and aggrieved against the said order, Appellant filed this Appeal.

Brief facts of the case are that the Appellant’s husband availed Housing Loan from Respondent No.2 to the tune of Rs.5 Lakhs on 26.09.2006 and Term Loan to the tune of Rs.7 Lakhs on 11.10.2006 for construction of a House and a Marriage Hall. Appellant’s husband was regular in payment of loan till he died on 11.01.2010 under unforeseen circumstances. Appellant found it difficult in paying the loan due and approached the Bank for settlement. The Bank charged exorbitant interest and other charges. When it was questioned, Respondent Bank issued Demand Notice under Section 13(2) of SARFAESI Act, 2002, on 07.06.2012. She sent a Representation dated 09.07.2012 offering to settle the loan account subject to waiver of interest. The Bank sent a reply dated 16.07.2012 stating that her offer of Rs.12 Lakhs was insufficient and asked her to pay the entire amount claimed in the Demand Notice. Possession Notice dated 22.09.2012 was issued for taking symbolic possession. Appellant filed Writ Petition in WP (MD) No. 14528/2012 before Hon’ble High Court of Madras at Madurai Bench, challenging the Possession Notice. Hon’ble High Court passed an order directing the Appellant to pay Rs.8 Lakhs within the period of six weeks and also to submit her proposal for settlement. Appellant took a Demand Draft for Rs.8 Lakhs on 06.02.2013 and approached the first Respondent for submitting the Demand Draft. However, she was asked to submit the Demand Draft along with the copy of order of Hon’ble High Court. Appellant received order of Hon’ble High Court only on 20.02.2013. Her Counsel sent a letter to the Bank on 08.03.2013 requesting the first Respondent to receive Demand Draft. The Bank sent a reply dated 12.03.2013 stating that the sale was held on 07.02.2013 in favour of Respondents 3 to 6. It is further submitted that first Respondent had not complied with the mandatory provisions of SIE Rules, 2002, such as, issuance of 30 days’ notice prior to sale, publication of sale notice both in English and vernacular newspapers, affixture of sale notice etc. There is violation in the tender notice issued that it was not personally addressed to the borrower and served.

Reiterating the aforesaid grounds, Learned Counsel for Appellant submitted that the Demand Notice was not sent to the other LRs of deceased borrower Mr. Shanmugam. To the Representations of the Appellant dated 09.07.2012, 27.07.2012 and 22.08.2012, no proper reply was sent under Section 13 (3A) of the SARFAESI Act, 2002. Despite the information given by Appellant as regards the order passed by the Hon’ble High Court of Madras at Madurai Bench in WP (MD) No. 14528/2012 along with Demand Draft, the Bank refused to receive the Demand Draft requiring copy of order, and then, proceeded to sell the property for a low price. Thereafter, the Appellant filed Writ Petition in WP No.4410/2013 against the order passed in Writ Petition in WP (MD) No. 14528/2012 and then the SA was filed. Appellant deposited Rs.13 Lakhs in the Securitisation Application. Sale proceeding was initiated against a dead person without properly impleading all the LRs of deceased borrower. First Respondent should not have proceeded with the sale of the property, when there was time for the Appellant to pay to the first Respondent as per the order of Hon’ble High Court. Sale Notice was not addressed to the Appellant and served. Only a notice intended to public is produced as Sale Notice. Loan was availed for the construction of Kalyana Mandapam and house, but the Demand Notice, Possession Notice and Sale Notice, do not mention about the existence of Kalyana Mahal and house. Even the Sale Certificate did not mention about these buildings. But, the Bank executed and registered a sale deed in favour of Auction Purchaser, which is not required, mentioning about these buildings. The property worth more than a Crore, was sold for Rs.80,20,000/-. Sale of one of the properties out of two properties, would have satisfied the loan due of Rs.20,57,939/-. On these grounds, Learned Counsel for Appellant prays for setting aside the sale.

Learned Counsel for Appellant pressed into service the decision in Canara Bank Vs. M. Amarender Reddy & Ors., reported in Manu/SC/0271/2017 for the proposition that when Banks and Financial Institutions are empowered to initiate measures for the purpose of enforcing any security interest created in favour of secured creditors, without intervention of the court or tribunal, such enforcement should be in accordance with the provisions of the 2002, Act. This decision is also relied for the proposition that issuance of notice under Rule 8(6) and 9(1) providing 30 days’ notice is absolutely necessary.

Learned Counsel for Appellant also relied on the decision of this Appellate Tribunal in RA (SA) No. 133/2013 dated 20.08.2025, for the proposition that merely because there is absence of pleadings that will not bar the Appellant to raise the plea when the parties knew that particular plea is involved in the Trial.

Learned Counsel for Respondents 1 and 2 Bank submitted that Respondents have taken these measures without compromising the procedure to be followed. All the measures have been taken as per the provisions of the SARFAESI Act, 2002. The Sale Notice sent to the Appellant was returned as “intimation served”. She deliberately avoided receiving the Sale Notice. Notice was taken to the address given in the loan documents, therefore, Appellant cannot express any grievance about non-service of Sale Notice. It is pleaded by Appellant that on the death of her husband Mr. Shanmugam, the mortgage property devolved upon her, therefore, the Appellant’s submission that the Notices under Sections 13(2) and 13(4) of SARFAESI Act, 2002, had not been taken to the other LRs, cannot be sustained. The property is incapable of division. Therefore, it was sold as single unit.

Learned Counsel for Respondent Bank further submitted that the order passed by Hon’ble High Court in WP (MD) No. 14528/2012 was not communicated to the Bank and the amount ordered by Hon’ble High Court was also not paid. The date of Sale Notice was 31.12.2012 and date of sale was 07.02.2013. Writ Petition in WP (MD) No. 14528/2012 was filed challenging Possession Notice dated 22.09.2012. Issuance of Sale Notice was suppressed in the said Writ Petition. Sale was held on 07.02.2013 and sale certificate was issued on 01.03.2013. The information regarding the Demand Draft dated 06.02.2013 for Rs.8 Lakhs was communicated to the Bank only on 08.03.2013. Therefore, the Bank was not aware of the order passed by Hon’ble High Court in WP (MD) No. 14528/2012, prior to the date of sale. In the letter dated 08.03.2013, it is not mentioned that the Appellant approached the Bank with the Demand Draft on 06.02.2013.

It is the further contention of Learned Counsel for Respondent Bank that the proof of service of sale notice, its publication and affixture are produced. The loan was availed for construction of building in two lands, and therefore, the properties are indivisible. Land includes building. The valuation report is also available. There is no proper pleading with regard to non-service of Sale Notice, undervaluation and excessive execution. Case of excessive execution was not pleaded in WP No. 14528/2012 and in the Securitisation Application.

Learned Counsel for the Auction Purchasers adopted the submissions of Learned Counsel for the Bank, and further submitted that, the Auction Purchasers are the bonafide purchasers and paid the sale consideration in time. The Kalyana Mandabam was constructed in both survey numbers. It situates in front portion and the house situates in back portion. Therefore, the properties cannot be divided. Since the Auction Purchasers are the bonafide purchasers, purchased the property for value, their rights have to be protected.

Considered the rival submissions and perused the records.

From the case of the Appellant, it is admitted that the Appellant’s husband availed a Housing Loan of Rs. 5 Lakhs on 26.09.2006 and a Term Loan of Rs.7 Lakhs on 11.10.2006 from the 2^nd Respondent for construction of House and Marriage Hall. The loan amount was liable to be paid in monthly instalment of Rs.4500/- and Rs.8450/-respectively, in 240 months. Due to demise of Appellant’s husband on 11.01.2010, the loan amount could not be paid, and therefore, the Bank proceeded to take measures under SRAFAESI Act, 2002. Thus, it is clear that there is no dispute regarding the borrowal of loan amount, default and initiation of measures under SARFAESI Act.

Appellant challenged the SARFAESI measures mainly on the following ground:

The perusal of the records filed along with type set, especially, Counter Affidavit filed by Respondent Bank shows

As per Demand Notice dated 07.06.2012, there was a demand of Rs.19,42,991/- as on 29.05.2012. After receiving this notice, Appellant sent her reply to the Bank on 09.07.2012 informing the Bank that her husband had executed a Will on 28.02.1991 and bequeathed the property mortgaged in her favour. After her husband’s death, she had no income and she had also suffered from illness. The interest claimed is excess and she is prepared to pay the amount if the excess interest amount is dispensed with. There is also an undertaking to pay Rs.12 Lakhs subject to cancelling the excess interest. The Bank sent a reply to this letter on 16.07.2012 informing that the accounts statement had been supplied from time to time and the offer of Rs.12 Lakhs is inadequate and directed the Appellant to settle the loan fully. Appellant sent a reply to this letter on 27.07.2012 reiterating her earlier offer to pay Rs.12 Lakhs. She requested the Bank to provide a copy of the statement of accounts. The Bank replied to this letter on 30.07.2012 informing that the offer of Rs.12 Lakhs is inadequate and she can approach the Branch for getting statement of accounts. The request for providing xerox copy of the security documents was also rejected. The Appellant sent a letter dated 22.08.2012 repeating the same offer and reiterating the request to send xerox copy of documents and copy of statement of accounts.

Notice dated 22.09.2012 was issued for taking symbolic possession of the property. As per Demand Notice dated 07.06.2012 and Possession Notice, there is a residential building bearing old door No. 2/136 in old survey No. 245 part, new survey No.583/3 comprised in patta No. 2/7, in Ward No. 3, Kallal village. The extent of land is 3942.25 sq. ft. The second item of property does not show the existence of any building. The survey number is shown as old survey No.245 part, new survey no. 583/4 comprised in patta No. 385, in Ward No. 3, Kallal village. The extent of land is shown as 4702 sq ft. The same description is found in the Possession Notice published in English and Tamil Daily.

One of the submissions of Learned Counsel for Appellant, though there is no pleading, is that, the other LRs of diseased borrower, was not served with Demand Notice, Possession Notice and Sale Notice etc. When it was candidly admitted by the Appellant in her reply dated 09.07.2012, that her husband executed a Will on 28.02.1991, bequeathing the mortgaged property in her favour, this Tribunal is of the view that after the death of her husband, she becomes the absolute owner of the mortgaged property, and therefore, it is not required to send Demand Notice, Possession Notice and Sale Notice to the other LRs of her husband.

The Respondent Bank produced the photographs to show the affixture of Sale Notice and paper publication issued in Dina Thanthi and the Hindu on 31.12.2012 in connection with sale. The original cover sent along with Sale Notice to the Appellant, returned as ‘intimation served’, is also produced.

With the help of loan availed, Kalyana Mandabam and house were constructed. There were two buildings in the lands mortgaged at the time of initiation of SARFAESI proceedings. However, in the Demand Notice, Possession Notice and the Sale Notice, the existence of two buildings are not specifically given. Though the Demand Notice and Possession Notice refer the residential building bearing old Door No. 2/136, there is no mention about the existence of Kalyana Mandabam. Even in the Sale Certificate and the letter addressed to the Sub-registrar, the existence of Kalyana Mandabam is not mentioned. However, the Authorised Officer had executed the registered sale deed in favour of the Auction Purchasers wherein the existence of residential building cum Kalyana Mandabam was specifically mentioned with measurements. Sale Notice ought to have contained a proper description. Impugned Sale Notice is actually not a Sale Notice but it is only a notice intended to circulate among the public informing about the sale. Sale Notice should have been addressed to the borrower(s)/guarantor(s) for giving opportunity of redemption. By not addressing the Sale Notice to the Appellant, Appellant was deprived of the opportunity of redemption.

Rule 8(6) of the SIE Rules, 2002 mandates the Authorised Officer to serve to the borrower a notice of 30 days for sale of the immovable secured asset. Rule 9(1) of the SIE Rules, 2002 prescribes that no sale of immovable property shall take place before the expiry of 30 days, in first instance, from the date on which the public notice of sale is published in newspapers or served to the borrower. Rule 8(7)(a) requires that the description of immovable property to be sold, including the details of the encumbrances known to the secured creditor, should be included in the sale notice. Annexure IV-A deals with form of sale notice for sale of the immovable properties. This Annexure requires that notice of sale should be given to the public in general and in particular to the borrower(s) and guarantor(s).

The impugned Sale Notice produced in this case is in Tamil titled as “Auction Sale Notice”. It refers about the borrower, loan amount, details of the immovable secured asset, reserve price, EMD amount and terms and conditions for sale. It was issued in Madurai by the Authorised Officer. In this Auction Sale Notice, there is no mention about the date of issuance of the sale notice. More importantly this notice is not addressed to the borrower(s) in particular. It addresses only public in general inviting tenders. Appellants have made sufficient pleadings in the Securitisation Application and in the reply Affidavit filed in the Securitisation Application about non-service of Sale Notice as required under Rule 8 and Rule 9 of the SIE Rules, 2002. On a plain reading of the impugned Sale Notice, this Tribunal finds that this is not the notice to be issued to the borrower(s) as contemplated under Rule 8(6), 9(1) and Annexure IV –A of the SIE Rules, 2002.

As already stated, loans were availed for construction of Kalyana Mandabam and house by using the loan amount. Those buildings were constructed. In the dates and events filed on behalf of Respondents 1 and 2 on 23.03.2026, it is confirmed that after demolishing the existing structure, the property was mortgaged to the Bank as vacant site, and later the wedding hall and the house were constructed in the land. Only a residential building bearing old door No. 2/136 was referred in the Demand Notice and Possession Notice. In the impugned Sale Notice even the existence of residential building No.2/136 is not referred. It is referred as if a vacant land. There is no specific mention of existence of Kalyana Mandabam and house in the impugned Sale Notice. Therefore, it is patent that the impugned Sale Notice was not issued as required under the SARFAESI Act and Rules made there under. Only if the Sale Notice is served on the borrower, in particular, the borrower would aware of the fact that the Bank has proposed to sell the property, and that borrower is required to exercise the right of redemption. The Bank having failed to send the Sale Notice individually upon the borrower, this Tribunal is of the view that, the Bank has violated the mandatory requirement of issuance of the Sale Notice to the borrower.

With regard to the valuation and excessive execution, Learned Counsel for the Respondent Bank seriously objected to, on the ground that, there is no pleading with regard to the valuation and excessive sale of the property. This Tribunal, on going through the pleadings in the Securitisation Application, finds that in para 20 of the Securitisation Application, it is pleaded that, “the Bank transferred the property at a throw away price behind her back”. In the Rejoinder Affidavit, it is pleaded that, “a combined reserve price of Rs.80 Lakhs by valuing the landed properties in Item No.1 & 2 together. The fairness in valuation of landed property for auction sale demands separate valuation of each property mentioned in the above items. The separate valuation of properties will not only bring more value to the properties of the applicant but also enable more participants in the auction sale proceedings which will definitely increase the value of the property and adversely affected the rights of the applicant and the method of combined valuation has considerably reduced the overall worth of the property.”

It is clear from these pleadings that the Appellant had taken up the issue of valuation in the Securitisation Application and in the Rejoinder Affidavit.

True it is that, there is no specific pleading with regard to excessive execution. Rule 8 (5) of SIE Rules, 2002 refers that the Authorised Officer may sell the whole or any part of such immovable secured asset. It reads as follows:-

Rule 8(5) empowers the Authorised Officer to decide as to whether the whole of the immovable secured asset is required to be sold or the sale of any part thereof would be enough. The discretion is primarily vested on the Authorised Officer to decide as to whether the sale of whole of the immovable secured asset required or a part of the immovable secured asset would suffice to satisfy the dues of the Bank. If the sale of the whole secured asset is necessary for realizing the debt due, then, the Authorised Officer can proceed to sell the whole of the secured asset. On the other hand, if the sale of a part of the secured asset is sufficient to realize the loan due, it would suffice that only a part of the immovable asset is sold for realizing the loan due.

Here in this case, there are two lands and two buildings, i.e. a Marriage Hall and a house. It is submitted by Learned Counsel for Respondent Bank that the buildings are constructed in both the survey numbers, and therefore, they are indivisible. It is further submitted that there is no separate access to the two buildings. This submission is refuted by Learned Counsel for Appellant, on the ground that, both buildings are independent buildings. There exists a gap of three feet between two buildings and there are front and back entrances with road access on the front and back side for both the buildings. Both buildings can be accessed separately by its distinct door numbers, namely door No.2/136 and door No.2/136-A. Separate electricity connections are provided. Photographs of both the buildings were produced even before the Tribunal in the form of an additional type set. Those photographs are also made available in the form of type set in this Appeal. Learned Counsel for Appellant produced sketch showing the existence of road access on both the front and back side of the secured asset. This Tribunal also finds from the valuation report dated 10.11.2012 obtained by the Bank showing the road access from front and back side of the secured asset. Therefore, this Tribunal finds that there are two independent buildings available on the secured asset which have access from front side and back side of the buildings, enabling access to the road.

As per the tender cum sale notice, the debt due was shown as Rs.20,57,939/-. Both the buildings with land were sold for Rs.80,20,000/- alone. Certainly, the sale of the one of the buildings would have fetched the loan due of Rs.20,57,939/-. Thus, it is a clear case of an excessive sale. Merely because there is no pleading with regard to excessive sale, we cannot ignore the excessive sale. It is relevant to extract paras 27 to 29 of the decision of this Appellate Tribunal in RA (SA) No. 133/2013, for better understanding.

The valuation report dated 10.11.2012 shows that the total extent of plot 8644.25 sq. ft., guideline value was Rs.45/- and prevailing market value was Rs.573/- per sq. ft., i.e. Rs.2,50,000/- per cent. On the basis of the market value, the value of the land was fixed at Rs.49,53,155/-. There is Kalyana Mahal in the name of Meenakshi Mandapam in Door No.2/136. The valuation with regard to the building shows that there are two floors, ground and first floors with RCC/Tiles roof/AC sheet, with mosaic and cement flooring. There is also residential area measuring 968 sq.ft. Two measurements are given for Mahal at 1342.473 sq. ft. and 1117.5 sq. ft. The value of the building is shown as Rs.42,17,674.

From this valuation report, it can be gathered that the valuer has not valued the residential building and Kalyana Mahal separately. He combined both the buildings and valued the property. From this valuation report, it is difficult to ascertain whether areas such as portico, tile roof (front), tile roof (back), AC shed store, AC shed Kitchen, have been valued as part of the Kalyana Mahal or the house. Had the report clearly stated that this area comes within Kalyana Mahal or house, it would have been easy to appreciate the respective area and value of Kalyana Mahal and house building. A combined valuation defeats the objective of proper valuation of the land and building.

When the loan is availed for construction of building, the Sale Notice ought to clearly specify the building constructed utilizing of the loan amount. In the absence such clarity, it goes without saying that the Sale Notice issued is defective. Here in this case, we find that, the Sale Notice is defective for the reasons narrated above, inasmuch as it does not specifically addressed to the borrower giving 30 days notice of sale, lacks proper description of buildings in the Sale Notice. Not only that, it is found that the properties are not scientifically valued for selling the property at right price. The sale of even one of the buildings would have satisfied the loan amount of the Appellant. As per the decision in Canara Bank Vs. M. Amarender Reddy & Ors., reported in Manu/SC/0271/2017, 30 days of notice of sale is mandatory. It is relevant to extract paragraphs 11 and 12 for a better understanding.

Admittedly, the Appellant filed the Writ Petition in WP (MD) No. 14528/2012 on the file of Hon’ble High Court of Madras at Madurai Bench to call for records pertaining to the Possession Notice dated 22.09.2012 and quash the same. Though the Bank was shown as Respondent, it appears that, the order was passed without hearing the Respondent Bank since there was no appearance on behalf of Respondent Bank. The order also reads that the Respondent Bank was served and its name was printed in the cause list. Despite that, there was no representation for Respondent Bank. Hon’ble High Court, with a view to give breathing relief to the Appellant, directed the Appellant to pay a sum of Rs.8 Lakhs to the Respondent Bank within a period of six weeks from the date of receipt of copy of the order. On such payment, the Appellant was given liberty to submit a proposal for settlement to the Respondent Bank. Further proceeding in pursuance of the Possession Notice was ordered to be kept in abeyance for a period of eight weeks from the date of receipt of copy of the order. If Rs.8 Lakhs was not paid within the time, the Respondent Bank was given right to proceed further in accordance with law.

The case of the Appellant is that this order of Hon’ble High Court passed on 30.01.2013, was informed to the Bank immediately with Demand Draft for Rs.8 Lakhs. However, the Bank refused to receive the Demand Notice on the ground that the order was not enclosed with Demand Draft. The copy of the order could be obtained only on 20.02.2013. Therefore, copy of the order could not be produced before the Bank immediately. The Appellant produced the Demand Draft for Rs.8 Lakhs taken in favour of Bank on 06.02.2013. This order is passed after serving the notice to Respondent Bank and on finding that there was no appearance for the Respondent Bank despite the name was printed in the cause list. Therefore, this order has a binding force against the Respondent Bank.

There is an order directing Appellant to pay Rs.8 Lakhs within the period of six weeks from the date of receipt of copy of this order. Despite that, the Bank had proceeded to sell the property on 07.02.2013. The Bank claims that this order was communicated to the Bank only on 08.03.2013 along with Demand Draft by Learned Counsel for Appellant. There is a contradictory statement as to the date of communication of this order along with Demand Draft. Appellant’s case is that immediately on getting Demand Draft on 06.02.2013, Appellant visited the Bank and informed the Bank about the Court’s order and presented the Demand Draft but it was refused by the Bank. The Bank’s case is that this order was not produced on 06.02.2013 with Demand Draft, but the Demand Draft was sent along with letter dated 08.03.2013 by the Counsel for Appellant Mr. D. Sadiq Raja and it was received only on 11.03.2013. By that time the sale was over, therefore, the Demand Draft was returned vide letter dated 12.03.2013.

The reading of the letter dated 08.03.2013 shows that there is no mention about the Appellant visiting the Bank with Demand Notice prior to the date of sale. The Affidavit filed in WP No. 4410/2013 reads that “as soon as the order

Be that as it may, when the notice was served in the Writ Petition and the name of the Bank was entered in the cause list and when the order was passed, this Tribunal is of the view that the order passed in Writ Petition in WP (MD) No. 14528/2012 binds the Respondent Bank. The Bank ought not to have proceeded further with sale of the property on 07.02.2013 when there is stay on paying Rs.8 Lakhs to the Bank and direction to keep the further proceedings in abeyance for the period of eight weeks, from the date of receipt of copy of the order. Therefore, this Tribunal is of view that the very conduct of the sale violating the order passed in WP (MD) No. 14528/2012 is illegal.

In view of the reasons stated above, this Tribunal finds that there is omission to service Sale Notice as required under Rules 8(6) and 9(1) of SIE Rules, 2002 to the borrower(s); omission to mention the buildings constructed out of loan availed in the Sale Notice; undervaluation and excessive execution of the secured asset. Most importantly, the sale was held when a restraint order passed in WP (MD) No. 14528/2012 was in force against the Bank directing the Bank to keep further proceedings in abeyance for a period eight weeks.

In the said circumstances, this Tribunal passes the following orders:

Both parties shall bear their own costs. All pending IAs, if any, stand closed.