Punjab National Bank & Ors. vs Mrs. K. Pushpa & Ors.

This appeal is filed under Section 18 of the SARFAESI Act, against the order of Learned Presiding Officer, DRT, Ernakulam dated 31.7.2015 passed in SA No.539/2013 by the appellant bank.

This is second round of litigation before this Tribunal. Respondent in this Appeal viz. Mrs. K. Pushpa filed SA No.539/2013 seeking the following reliefs;

Learned Presiding Officer, DRT, Ernakulam by his order dated 31.7.2015 allowed the Securitization Application. Aggrieved against the said order, appellant bank filed an appeal before this Tribunal in RA (SA) 63/2015. Former Chairperson, DRAT, Chennai by order dated 9.5.2019 allowed the Appeal. Against the order allowing the appeal, first respondent filed OP(DRT) 151/2019 before the Hon’ble High Court of Kerala. Hon’ble High Court of Kerala passed an order in the petition on 24.9.2025, setting aside the order passed by this Tribunal passed in RA(SA) 63/2015 on 9.5.2019, with a direction to re-hear the Appeal, i.e., RA(SA) 63/2015 in accordance with law, after referring to the question stated in the order. In this background, this appeal was re-heard.

The question raised in the order of the Hon’ble High Court of Kerala in paragraph 5 of the order is that, “Whether the petitioner should have been served with a fresh notice, when sale fixed on 21.3.2013 did not fructify in view of the order passed by Hon’ble High Court of Kerala in WPC No.7446/2013 on 20.3.2013, directing the postponement of sale on the condition of the first respondent remitting one-third of the amounts due on or before 11.00 AM on 21.3.2013 and the balance amount in five equal instalments.” Challenging the publication of Sale Notice dated 15.2.2013 by calling for tenders from general public to be opened on 21.3.2013. It is an admitted case of the parties that as per the conditional order passed WP No.7446/2013 on 20.3.2013, first respondent had only paid one-third of the amount due on 21.3.2013 but failed to pay the balance amount in five equal instalments, starting from the first instalment to be paid on or before 21.4.2013 and the remaining insalments on or before 21^st of every succeeding months.

It is the case of learned counsel for the appellant bank that the order of the Hon’ble High Court of Kerala passed in WP(C)No.7446/2013 was a self-operating order. If the first respondent had not complied with the terms of the order, bank was empowered to proceed with coercive action already initiated. Therefore, there is no requirement for giving a fresh notice for the sale of the property. The sale had to be adjourned at the instance of the first respondent. In that case, as decided by the Hon’ble Supreme Court of India in re, S. Karthik Vs. N. Subhash Chand Jain reported in AIR Online 2021 SC 765, fresh notice for sale is not required.

In pursuance of the sale notice dated 15.2.2013 fixing the sale on 21.3.2013, tenders had been received and sale was confirmed in favour of Jyothirmayi G, the third respondent herein. There is no irregularity or illegality in the conduct of sale. Moreover, Securitization Application was not filed within the period of 45 days, as required under Section 17 of the SARFAESI Act. Hon’ble High Court of Kerala had not given any leverage for condoning the delay in filing the Securitization Application. No material produced in support of other grounds taken in the Securitization Application like undervaluation, etc. In the said circumstances, learned counsel for the appellant bank prayed to set aside the order passed by learned Presiding Officer, DRT, Ernakulam and allow this appeal.

In reply, learned counsel for first respondent/mortgagor submitted that on the basis of the order passed by Hon’ble High Court of Kerala in WP(C) No.7446/2013, first respondent pressed the bank to give the accounts statement to facilitate the first respondent to pay the amount. Accounts statement furnished by the bank claimed huge amount, without considering the payments already made by the first respondent and the principal borrower. As per the sale notice, amount demanded as due is Rs.12,00,847.81p. One-third of this amount, i.e., Rs.4,30,000/- was paid by the first respondent. Amount paid by the principal borrower had not been considered. Without considering these amounts, a huge amount was claimed. There was a dispute in the amount claimed. Therefore, the amount could not be paid. In the said circumstances, when the bank proposed to sell the property, a fresh sale notice ought to have been issued to the first respondent and that was not done in this case. Therefore, impugned sale is not valid.

That apart, first respondent had raised many grounds in the securitization application with regard to service of notice, valuation of the secured asset, etc. Specific plea was raised stating that the sale impugned in the Securitization Application was not preceded by issuance of a fresh sale notification and that the sale notice had not been served on the first respondent nor it was affixed on the secured asset. Despite taking specific plea in the Securitization Application, the appellant bank had failed to produce the copy of the sale notice, proof of service or non-service of postal sale notice and affixture of sale notice. Even before this Tribunal, these documents had not been produced to show compliance of mandatory provisions of SARFAESI Act for sale of the property.

The amount ordered by Hon’ble High Court of Kerala in WP(C) No.7446/2013 could not be paid for the reason that first respondent disputed amount claimed by the bank and sent a letter 26.3.2013 requesting to furnish statement of accounts regarding the amounts due. Though it was objected by reply, bank had not sent any rejoinder to the objections raised. Valuation report of the first respondent dated 11.9.2013 shows that the fair market value of the property was Rs.96.00 lakhs, open market value as Rs.1.00 crore and distress value was Rs.86.00 lakhs. Reserve price was fixed only at Rs.26.00 lakhs and the property was sold for Rs.26,75,000/-. Bank had not produced any valuation report to justify the sale of the property for Rs.26,75,000/-. When there is no material produced to show the number of tenders received, it can be presumed that sale was held in collusion with the auction purchaser and the bank officials.

In reply to this submission, learned counsel for the appellant bank submitted that due to passage of time, bank is not able to retrieve the documents like copy of the sale notice, proof of service/non service/returned covers and affixture before this Tribunal. In the light of scope of remand, there is no need to look into service of sale notice through post, affixture, etc. When bank was empowered to proceed on the basis of earlier coercive action initiated on the first respondent on failing to comply with the order, it is not required to issue a fresh notice after dismissal of the Writ Petition No.7446/2013. On the basis of the tenders received, the sale was confirmed in favour of the auction purchaser, respondent No.3 herein. Writ Petition(C) No.7446/2013 was filed only after receiving the sale notice. Therefore, the ground of non-service of sale notice, affixture of sale are no grounds for doubting the sale, rather for setting aside the sale. First respondent has not challenged any other measures like possession notice, order obtained under Section 14 of the SARFAESI At and the sale notice. He reiterated that SA was filed beyond the period of limitation, therefore, barred by limitation. Only to avoid payment as per the order of the Hon’ble High Court of Kerala, first respondent demanded the accounts statement and involved in litigation without making genuine efforts to pay the amount. Bank had also filed OA No.192/2008 for recovery of dues and that was allowed. Since due amount was realized through sale of property under the SARFAESI proceedings, execution proceedings was not initiated. If the sale is set aside in this distant point of time, it would cause great prejudice to the bank and the auction purchaser.

I have considered the rival submissions and perused the documents.

From the consideration of materials produced and submissions of learned counsel appearing for parties, it is clear that Hon’ble High Court of Kerala in OP (DRT) No.151/2019 remanded the case to decide the issue as to whether the petitioner should have been served with a fresh notice of sale?

Hon’ble High Court of Kerala recorded that first respondent raised the following contentions;

The fact of non-compliance of the order passed in WP(C) No.7446/2013 was recorded. It was observed that there was no reason at all stated in the order of DRAT, Chennai, as to why the order of DRT was wrong, warranting interference of DRAT and that Mathew Varghese case was not even referred to. After recording these observations, the issue was referred to this Tribunal for a fresh consideration.

While concluding, Hon’ble High Court of Kerala also gave liberty to the parties to raise all the contentions. Therefore, submission of learned counsel for the appellant bank that that except the issue as to whether a fresh sale notice, in the circumstances stated above, is required or not, alone to be considered, cannot be accepted. Reason is that Hon’ble High Court of Kerala in OP(DRT) No.151/2019, gave liberty to the parties to raise all the contentions.

With regard to the issue raised by Hon’ble High Court of Kerala as to whether fresh sale notice was required, this Tribunal is of the view that in the light of the order of the Hon’ble High Court of Kerala in WP(C) No.7446/2013, no fresh sale notice is required. The reasons are, as follows:

Therefore, this Tribunal is of the considered view that there is no need to issue a fresh sale notice, once first respondent failed to comply with the order of Hon’ble High Court of Kerala in WP(C) No.7446/2013. Accordingly the issued raised by the Hon’ble High Court of Kerala in OP(DRT) No.151/2019 is answered.

However, matter does not end there. Reading of Securitization Application shows that several grounds have been raised, especially, ground of non service of sale notice, failure to affix sale notice on the secured asset and undervaluation. In the counter filed to the Securitization Application, bank denied the allegations of non service of sale notice, non affixture of sale notice, undervaluation, etc. and claimed that SARFAESI sale was held on compliance of mandatory procedural requirements.

As per the un-amended Rule 8(5), 8(6) and 9(1) of SIE Rules, 2002, sale has to be, by any of the following modes, as detailed below;

Authorised Officer is required to serve the borrower a notice of 30 days of sale of immovable secured asset. Proviso to Rule 8(6) requires that sale notice shall be published to give public notice of sale in two leading newspapers, one in vernacular language having sufficient circulation in the locality. Rule 8 (7) mandates that notice of sale shall be affixed on the conspicuous part of the immovable property and if Authorised Officer deems it fit, put it on the website of the secured creditor on the internet. Rule 9(1) says that sale of immovable property shall not take place before expiry of 30 days from the date on which sale notice is published in the newspapers as referred to in the proviso to sub-rule 6 or notice of sale has been served to the borrower.

In the order passed by learned Presiding Officer in SA No.539/2013, it is shown that first respondent produced Annexures A1 to A14 and bank produced Annexures B1 to B3. Auction purchaser i.e., 5^th respondent before DRT produced B4 to B7. From the documents produced, it can be seen that publication of sale notice issued in English and Malayalam daily was produced. Copy of sale notice, proof of service/non service of sale notice, affixture of sale notice, valuation report had not been filed before DRT. When the matter was argued before this Tribunal, this Tribunal had granted sufficient time to the appellant for production of documents to show service of sale notice and its affixture. Despite that, these documents were not produced and it was informed by Learned Counsel for the appellant that these documents are not available at this point of time. Grounds on non service of sale notice, non affixture of sale notice and undervaluation of the property had been raised in the SA itself. Therefore, it is the bounden duty for the appellant bank to produce relevant documents to show that sale notice was served on the appellant, proof of service/non service by production of acknowledge cards or returned covers, etc.. No care was taken to file these documents before DRT. Even here, these documents had not been produced. Therefore, this Tribunal has to draw only an adverse inference that no sale notice was taken and served on the first respondent. Added to that, when it was specifically pleaded that property was undervalued and valuation report is not produced, it is again the duty of the appellant to produce the valuation report of the bank. This has not been done.

Therefore, this Tribunal is of the view that appellant has miserably failed to establish and prove that sale of the secured asset was held, by following the mandatory provisions of the SARFAESI Act.

In this view of the matter, this Tribunal concurs with the finding of the Learned Presiding Officer that sale held in favour of the auction purchaser has to be set aside, of course for the reasons stated above, in this appeal. Therefore, the order of Learned Presiding Officer, DRT, Ernakulam dated 31.7.2015 passed in SA No.539/2013 warrants no interference by this Tribunal and is confirmed. Appellant bank is at liberty to proceed further with the sale of the property in the manner known to law.

In the result, Appeal, RA(SA) 63/2025 is dismissed. Parties are directed to bear their own costs.

Pending IAs, if any, stand closed.