Punjab National Bank vs Binod Kumar And Ors

R. D. Khare, Chairperson

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 judgment and order dated 29.10.2019 passed by the DRT, Patna, whereby the securitization application filed by the respondents-Borrowers was allowed and the sale notice dated 16.04.2015 was set aside.

The brief facts of the present case are that the respondent nos. 1 & 2-Borrowers were granted credit facility in the year 2003 and in order to secure the same, they signed and executed the loan documents as well as created equitable mortgage over their property in question in favour of the appellant-Bank. The borrowers failed to repay the loan amount in terms of the agreement, therefore, the account was classified as NPA in the year 2006. The Bank issued demand notice dated 13.07.2006 under section 13(2) of the SARFAESI Act, 2002 for a sum of Rs. 16,90,552/- as on 31.03.2006. Since the borrowers did not pay any amount against the said demand, the symbolic possession of the property in question was taken by the Bank by issuing possession notice dated 07.11.2007 under section 13(4) of the said Act (copy of the said notice is at page no. 8 of the reply filed by the borrowers).

It appears that the appellant-Bank had taken the physical possession of the property in question on 02.02.2012 in presence of the District Administrative Officer and police force by preparing Panchnama on 02.02.2012 (copy of report and Panchnama is at page no. 29-33 as annexure no. 4 of the memo of appeal). After taking physical possession of the property in question, the appellant-bank published the notice of physical possession in the newspapers on 05.02.2012. Thereafter, sale notice dated 13.02.2012 was issued.

The respondent no. 2-Indu Kumari filed one S.A. No. 28/2012 challenging the physical possession taken by the bank, but the same was dismissed vide order dated 07.02.2012 with direction to deposit the amount as per schedule given in the said order, but the same were never complied with.

It transpires that the respondent nos. 1 & 2-borrowers preferred Civil Writ Jurisdiction Case No. 5047/2012 before the Hon’ble High Court, which was disposed off vide order dated 29.03.2012 with direction to the borrower to pay entire dues along with interest within two months by modifying the order dated 07.02.2012 to the extent of carryout the title deed of agricultural land from the seized house by the Bank and it was held that the action of the Bank for taking physical possession was lawful, valid and effective and in case of default in repayment in two months, it will be absolute and no one can interfere in possession of the said property.

It is averred that the appellant-bank issued fresh auction notice dated 16.04.2015 scheduling the auction to be held on 20.05.2015 and the property was sold for Rs. 32,25,000/-. After deposit of sale proceed, the appellant-Bank issued sale certificate in favour of the auction purchaser, Ram Sekhar Singh, who is now deceased and the respondent nos. 3 to 6 are the legal heirs of the deceased purchaser. Thereafter, the borrowers filed S.A. No. 18/2017 before the Tribunal below challenging the physical possession and the auction notice dated 16.04.2015, which was dismissed vide order dated 20.05.2017, which was challenged by the borrowers by filing the civil writ jurisdiction Case No. 8668/2017. The Hon’ble High Court, Patna set aside the order dated 20.05.2017 and remanded the matter to the Tribunal below for deciding all aspects of the matter on merits vide order dated 17.08.2017. Pursuant to the said order, the Tribunal below allowed the S.A. No. 18/2017 vide order impugned and set aside the auction sale notice dated 16.04.2015. Being aggrieved by the said order, the present appeal has been filed by the appellant-Bank.

Learned counsel for the appellant submits that the S.A. is highly time barred and no delay condonation application has been filed. Learned counsel for the appellant has drawn attention of this court to the annexure 13 at page no. 59 of the paper book, and stated that this is the proclamation of sale, which was pasted on the property in question and photographs thereof are appended at page no. 60. It is further contended that the sale notice for publication of auction are on record as annexure no. 11, 12 & 14, which is dated 16.04.2015, 18.04.2015, 17.04.2015 and annexure 13 is undated.

Learned counsel for the appellant-Bank further submitted that he has received e-mail from the Bank authorities, wherein it was intimated that on account of merger and transfer of papers from the concerned Branch to other branch, the records are not traceable.

Learned counsel for the respondents-Borrowers contends that as per admitted position of the counsel for the appellant-Bank that the possession of the property in question was taken on 02.02.2012 and it is contended that when the possession was taken over by the Bank, how could the Bank serve notice under Rule 8(6) on the same address. It was further contended that the Bahi, which was allegedly shown in the court, there was no provision at that time for service of notice by hand, which provision came into force on 01.09.2016. It was also contended by the respondents-Borrowers that in the Bahi, it was stated “Lene se inkar Kiya”. it is argued that when the possession was taken over by the Bank, then there was no occasion for the respondent-borrower to be present there or refuse to accept the said notice. Therefore, contention raised by the Bank is untenable in law. It was further contended by the learned counsel for the respondents-Borrowers that the sale notice dated 16.04.2015 was sent on 18.04.2015 and in this regard, page no. 60 of the paper book has been referred to, which is a photograph dated 02.02.2012 and this is the date on which physical possession was taken by the bank. As such the bank has not complied with the provision of Rule 8(6).

It was further argued on behalf of the respondents-Borrowers that as per annexure no. 21 at page no. 95 of the paper book which is format of the valuation report of the appellant-bank, the market value of the property was shown to be Rs. 51,40,900/- and distress value of the said property was shown to be approximately 25% less than the actual market value, and thus actual distress value of the property taking into consideration of the market value would come to Rs. 3855000/-, but the property has been sold for Rs. 32.25 lacs, which is even less than the distress value. As such it is clear violation of the Rule 8(5) of the Rules, 2002. It was further contended that there is complete non compliance of Rule 8(6) read with proviso of Rule 8(7) (old provision) and Rule 9(1) of the Security Interest (Enforcement) Rules, 2002 and therefore, the appeal is liable to be dismissed.

Having heard the learned counsels of the parties and considering the material available on record, undisputedly, there is no grievance of any party with regard to the demand notice and possession notice.

The contention of the appellant-Bank that the S.A. filed by the respondents-borrowers was highly barred by time and no application for condonation of delay was filed is not tenable, as it is evident from para 2 of the order impugned that the limitation was allowed by the Tribunal below vide order dated 27.02.2019 and the same has never been challenged by the appellant-bank, therefore, the appellant cannot be permitted to raise this issue at this stage as the said order has now attained finality.

The contention of the borrowers that the property in question has been sold below the distress value cannot be dealt with in the present appeal filed by the bank. If the borrowers had any grievance with regard to it, they would have challenged the same by filing a separate appeal before this Tribunal but they did not do so. Hence the contention of the respondent-borrowers is declined.

The main controversy in the present case is with regard to setting aside the auction sale notice dated 16.04.2015 issued by the bank on the ground of non service of the said notice upon the borrowers.

This is to be seen that the sale notice was issued on 16.04.2015 and the same was sent to the respondent borrowers by hand on 18.04.2015 through Dak Delivery Register, photostat copy of the same is annexed at page no. 57 of the paper book wherein a remark has been given “Lene se inkar kiya”. In this regard para 5.11 of the paper book is relevant wherein the bank itself has stated that “ the appellant bank had taken physical possession on 02.02.2012 in the presence of District Administrative Officer and Police force by preparing proper panchnama, a copy of the same has been placed at page no. 30 of the paper book. When the physical possession of the property was taken by the bank on 02.02.2012 then how the bank had sent the sale notice dated 18.04.2015 to the borrowers on the said address and how it can be believed that the borrowers had refused to accept the same as reported by the peon namely Prakash Mahto of the bank. The said copy of the register only contains the name of the borrowers and not of any other party, meaning thereby it was prepared as an after thought just to prove the service of sale notice upon the borrowers by placing a Photostat copy of the Dak Delivery Register. Besides it, on asking for by the Tribunal below repeatedly, the appellant bank has not produced the original copy of the said register. If the borrowers had refused to receive the sale notice, the appellant-bank must have sent the same through registered post or speed post but the counsel for the appellant submitted that no records are available with the bank. Thus it is clear that there is no compliance of Rule 8(6) of the Rules 2002. As such the Tribunal below has rightly set aside the auction sale dated 20.05.2015.

In view of the discussions as held above, the contention of the appellant that the S.A. filed by the respondent-borrower was highly barred by limitation and no application for condoning the same was filed is not tenable because on bare reading of para 2 of the order impugned, it is evident that the limitation was allowed by the Tribunal below vide order dated 27.02.2019, which has not been challenged by the appellant-Bank, therefore, the same has attained finality.

Further, the contention of the respondents-borrowers that the secured asset has been sold at the distress value cannot be dealt with the present appeal filed by the Bank and in case the borrower was aggrieved with the said auction of the Bank, they could have filed a separate appeal to challenge the same, which has not been done. Therefore, they cannot be permitted to challenge the same in the present appeal filed by the Bank.

The only controversy in the present case is with regard to service of sale notice upon the borrowers as per Rule 8(6) of the Rules, 2002. It is admitted by the Bank itself that no records are available with the Bank, which may show the service of sale notice upon the respondents-borrowers. As such the Bank has apparently failed to prove that the sale notice was ever served upon the borrowers. Thus the action of the Tribunal below by setting aside the auction sale dated 20.05.2015 cannot be flouted. Hence the order impugned does not warrant any interference of this Tribunal and the appeal is liable to be dismissed.

Accordingly, the appeal is dismissed with no order as to costs.

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