M/s Norton Industries vs Punjab National Bank

Ashok Menon, Chairperson

M/s Norton Industries, a sole proprietorship belonging to the Appellant has impugned the judgment and order dated 17/09/2013 dismissing Securitisation Application (S.A.) No. 39 of 2013 on the files of the Debts Recovery Tribunal-I, Ahmedabad which was filed by the Appellant under Section 17 of the Securitisation & Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 (“SARFAESI Act”, for short).

The facts and brief are thus:

The Appellant had availed a cash credit facility of ₹3 lakhs from the 1st Respondent Punjab National Bank (PNB) in the year 1997 and created a security interest. Although the repayment was regular for some time, due to loss in business and unavoidable circumstances the Appellant defaulted repayment which resulted in his account being classified as non-performing assets (NPA) on 30/03/2003. It is contended that the demand notice purportedly issued on 20/11/2003 under section 13 (2) of the SARFAESI Act demanding a sum of ₹4,06,242.96 was never served on the Appellant. It is also contended that consequent to the account being classified as NPA, the bank could not have debited interest. In violation of that, the bank kept on debiting interest accrued even after the classification of the account as NPA. Moreover, it is also contended that the notice does not indicate that it is a demand notice issued under section 13(2). The bank did not take any action for almost 7 years and after that, issued a possession notice on 05/08/2010 to take symbolic possession of the property mentioning the outstanding amount as ₹3,52,081.96 as of 31/07/2010. It is contended that the notice was not published as required under Security Interest (Enforcement) Rules, 2002. This would indicate that despite the account being classified as NPA, the Appellant continued to make payments towards the debt and the bank also credited those payments made by the Appellant. Thereafter the bank published its sale notice on 12/09/2011 intending to sell the property by public auction on 20/10/2011. The sale notice however indicates the outstanding amount mentioned in the demand notice. The secured asset was sold for a sum of ₹26,51,000/-and the Sale Certificate was issued in favour of the 2nd Respondent on 09/11/2011. The Appellant was never informed about the sale. The excess amount received by the bank was also not paid to the Appellant. The sale was conducted without giving the mandatory 30-day notice to the Appellant. The Appellant filed S.A. No. 23 of 2013 before the D.R.T. challenging all the Sarfaesi measures till then, and the same was dismissed on 25/04/2013. It was during the pendency of the aforesaid S.A. No. 23 of 2013 the bank had applied to section 14 of the SARFAESI Act before the Chief Metropolitan Magistrate and obtained an order on 30/03/2013 to take physical possession of the secured asset. The present S.A. No. 39 of 2013 was filed on 30/04/2013. The Appellant had sought relief to declare that the notice dated 20/11/2003 under section 13 (2) of the SARFAESI Act is stale that the bank cannot proceed based on the notice and that all actions taken under the notice are contrary to the Act and Rules. Besides that, the Appellant also sought a declaration that the notice dated 05/08/2010 under section 13 (4) of the SARFAESI Act to take symbolic possession of the secured asset is illegal and needs to be quashed. Prayer to quash the sale notice dated 12/09/2011 and the auction proceedings held on 20/11/2011 is also sought. The Appellant had also prayed that the order of the Chief Metropolitan Magistrate (CMM) under section 14 of the SARFAESI Act dated 20/03/2013 be quashed. The Appellant had also sought an order from the Tribunal to direct the bank to accept the entire dues and exercise the Appellant’s right to redeem the secured asset.

Respondent No. 2 which is the auction purchaser had intervened and got itself impleaded in the appeal. A detailed reply was filed by the 2nd Respondent stating that all the reliefs sought by the Appellant are barred by limitation. It is also pointed out that given the dismissal of the earlier S.A. No. 23 of 2013, the Appellant cannot file another S.A. seeking the same reliefs again. It is contended that the 2nd Respondent had paid the entire sale consideration after confirmation of the sale, and the Sale Certificate was also issued in its favour. Despite that, the Appellant is causing hindrance by raising untenable contentions in the application.

The 1st Respondent bank has also opposed the appeal stating that the Appellant has no grounds to sustain the appeal.

Heard Mr Prashant Pandit, the Ld. Counsel appearing for the Appellant and Ms Asha Bhuta, the Ld. Counsel appearing for the Respondent bank. Records perused.

The most important point that arises for consideration in this appeal is the maintainability of a successive application under section 17 of the SARFAESI Act by the Appellant after the dismissal of his earlier S.A. No. 23 of 2013. In consequence of the dismissal of that S.A., all contentions raised by the Appellant in the S.A. is deemed to have been disallowed. Therefore, It is impossible for him to come up with contentions raised in the S.A., all over again. The present S.A. No. 39 of 2013 was filed consequent to the issuing of the order under section 14 of the SARFAESI Act by the CMM. The Appellant can maintain an appeal by challenging the order of the CMM. The Appellant has not however pointed out any infirmity in that order of the CMM. The contention was raised as to whether the bank could have applied to section 14 after taking symbolic possession and selling the secured asset. This position is no longer Res Integra. The Hon’ble Supreme Court in ITC Ltd vs. Blue Coast Hotels Ltd & Ors (2018) 15 SCC 99 held that the secured creditor has the right to take actual possession of the secured assets after taking symbolic possession and conducting the sale of the property.

Even going into the merits of the other contentions raised by the Appellant, it is not sustainable the Appellant has himself written a letter on 18/08/2004 admitting his liability and seeking time to make the payment. The Appellant issues post-dated cheques in the discharge of the liability. This action on the part of the Appellant would amount to a waiver of his contentions regarding the non-receipt of the demand notice issued by the bank. The acknowledgement card received by the bank indicates that the demand notice has been served.

The contentions raised by the Appellant and therefore unsustainable, I find no reason whatsoever to interfere with the impugned judgment and order of the D.R.T.

The appeal is without any merits and is, therefore, dismissed.