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Judgment
JUSTICE R. D. KHARE, CHAIRPERSON
The present appeal has been filed under section 18 of the Securitization and Reconstruction of Financial Asset and Enforcement of Security Interest Act, 2002 (hereinafter referred to as "the SARFAESI Act") against the judgment dated 20.05.2023, whereby the S.A. No. 596 of 2017 filed by the respondents-borrowers has been allowed by the Tribunal below.
Brief facts of the present case are that the respondent no. 1-Firm was granted a cash credit limit of Rs.35.00 lacs through its proprietor respondent no.2 and the respondent no.2 created an equitable mortgage over his property situated at K-9, UPSIDC Industrial Area, Naini, Allahabad to secure the said facility. Since the respondent-borrower did not adhere to the terms of the loan agreement, therefore, the account was classified as NPA on 30.06.2017 and a demand notice dated 17.07.2017 was issued by the Bank u/s 13(2) of the SARFAESI Act for a sum of Rs.38,03,228/-. Since the borrower did not pay any heed to the said demand, therefore, the possession notice dated 25.10.2017 was issued u/s 13(4) of the said Act.
The respondent-borrower challenged the proceedings of the Bank before the Tribunal below by filing the S.A. No. 596 of 2017. During the pendency of the said application, the appellant-Bank issued sale notice dated 03.11.2020 scheduling the auction of the property in question on 24.11.2020 and the physical possession of the property in question was also taken pursuant to the order passed by the District Magistrate u/s 14 of the SARFAESI Act, which were challenged by the S.A. applicant by way of amendment application, which was allowed and the S.A. was amended accordingly. The Tribunal below vide order impugned has allowed the S.A. of the respondents-borrowers holding that there was violation of Rule 8(1) and 8(2) of the Rules, 2002, as the symbolic possession notice dated 25.10.2017 was neither affixed on the secured asset nor it was published in two newspapers and also there was no proof of deposit of balance 75% amount of the bid price. Being aggrieved by the said order, the present appeal has been filed by the appellant-Bank.
Learned counsel for the appellant submitted that the possession notice dated 25.10.2017 was served, affixed and published in the newspapers and in this regard, he has referred to annexure no. 5 and 6, which are the possession notice, postal receipts, affixation and its publication in the newspapers. It was further contended that the auction sale notice dated 03.11.2020 was served, affixed and published in the newspapers, copies of the postal receipts, its affixation and publications are placed as annexure no. 12 to the memo of appeal. It was also contended that after auction of the property in question, 25% of the bid amount was deposited by the auction purchaser on 25.11.2020 and time was extended by the Bank vide its letter dated 09.12.2020 pursuant to the request letter of the auction purchaser dated 09.12.2020 for a further period of 30 days, copies of both the letters are filed at page no. 62 and 63 of the paper book. It was further contended that pursuant to the said extension letter, the auction purchaser deposited remaining 75% of the bid amount on 31.12.2020. It was thus contended that without considering these facts, the Tribunal below has set aside the auction proceedings of the Bank while passing the order impugned, which is not sustainable. It was, therefore, prayed that the order impugned may be set aside and the appeal may be allowed.
Learned counsel for the respondents-borrowers submitted that the appellant-Bank has failed to serve the demand notice and possession notice upon the borrowers. It was further contended that appellant-Bank has only produced two postal receipts dated 30.10.2017 with regard to service of possession notice upon the respondents-borrowers, but the possession notice was not published in the newspapers having wide circulation in the area where the borrowers reside. It was also contended that the appellant-bank has obtained the order u/s 14 on the basis of defective demand notice dated 17.07.2017 and possession notice dated 25.10.2017 and the Bank has also failed to obtain the distress value of the property in question pursuant to the valuation report dated 20.07.2020. It was further contended that physical possession of the property in question was taken during the pendency of the S.A., but no Panchnama is on record. It was thus contended that the appellant-Bank without complying the mandatory provisions of the Act and Rules made thereunder has sold the property in question. It was thus contended that the Tribunal below has rightly set aside the auction proceedings of the Bank while passing the order impugned, hence the same is not required to be interfered with by this Tribunal. It was, therefore, prayed that the appeal filed by the appellant may be dismissed with heavy costs.
I have considered the rival contentions of the learned counsels for the parties and perused the record.
The main controversy involved in the present case is as to whether the appellant-Bank has complied with the Rules 8(1), 8(2) and Rule 9 of the Rules, 2002 or not?
It is to be seen that the appellant-Bank issued possession notice on 25.10.2017 and the same was stated to have been served to the borrowers and affixed at the conspicuous place of the property in question and also published in two newspapers. Copies of the postal receipts, pasting and publications are placed at page no.43, 44, 45 and 46 of the memo of appeal. As per the postal receipts, the possession notice was sent to the respondents no. 1&2-borrowers on 30.10.2017. In this regard, Rule 8(1) says that the authorized officer shall take or cause to be taken possession by delivery of possession notice prepared as nearly as possible in Appendix IV to these Rules to the borrower and by affixing the possession notice on the outer door or at such conspicuous place of the property. From it, it is clear that possession notice is to be delivered first, then affixed at the property in question, meaning thereby, if the borrower does not receive the said notice, in that case the authorized officer has to send the same to the borrowers through registered post/speed post. As such, in the present case, it appears that the borrowers would have not received the same personally, therefore, the same was sent by the Bank through registered post. The said notice was also pasted at the property in question, which is evident from the page no. 44 of the paper book, which is copy of the pasting of possession notice at the property in question. The pages no. 45 & 46 are the publications of the said possession notice. As such the finding of the Tribunal below with regard to non-serving and pasting of possession notice is incorrect.
So far as the compliance of Rule 9(4) of the Rules, 2002 is concerned, the property was sold on 24.11.2020 pursuant to the sale notice dated 03.11.2020 and 25% of the bid amount was deposited on 25.11.2020, which is not in dispute. The finding of the Tribunal below with regard to non-deposit of remaining 75% of the bid amount is also not sustainable on the ground that after confirmation of sale by the bank vide its letter dated 26.11.2020, the respondent no. 3-auction purchaser vide its letter dated 09.12.2020 had requested the appellant-Bank for extension of time, which was allowed by the Bank vide its letter dated 09.12.2020 by granting a further period of 30 days from 09.12.2020 to deposit the remaining 75% of the bid amount and pursuant to it, the respondent no.3 had deposited the same on 31.12.2020, which is well within the time as granted by the Bank and the same is also evident from the statement of account filed by the appellant-Bank at page no. 69 of the paper book.
So far as the contention of the respondents-borrowers that the demand notice was not served, is not tenable, because the same has been held to be served upon the borrowers by the Tribunal below while passing the order impugned. If the respondents-borrowers were aggrieved by the said part of the order impugned, they ought to have challenged the same before the competent court, but they did not do so, therefore, the said part of the order impugned has attained finality. Hence, the same is not required to be dealt with again in the present appeal filed by the Bank.
Since the possession notice has been held to be valid, therefore, the order dated 31.01.2019 passed by the District Magistrate stands revived because the same was also quashed by the Tribunal below on the ground of holding the possession notice to be invalid.
In view of the discussions as held above, the order impugned is liable to be set aside, hence the same is set aside and the appeal filed by the Bank is allowed with no order as to costs.
A copy of this order be forwarded to the parties as well as to the DRT concerned and be also uploaded on e-DRT Portal.