R. Dhanalakshmi & Ors. vs Senior Manager, Union Bank Of India & Ors.

This case has a checkered history of travelling 20 years from 2006 till now through various Forums. Parties, mainly, appellants had approached Hon’ble High Court of Kerala four times and this Tribunal three times before being disposed today by this Tribunal. You may be sure that this is not over yet. The details are, as under:

RA(SA) 25/2020 is filed against the dismissal of TSA No.10/2016 (SA No.66/2006) and MA(SA) No.10/2020 is filed against the order allowing IA No.179/2016 in TSA No.10/2016 by Learned Presiding Officer, DRT-II, Ernakulam on 29.9.2018, under Section 18 of the SARFAESI Act.

TSA No.10/2016 (SA No.66/2006) was filed to set aside Annexures P1, P4, P6 and P7 and Annexures I, IV VI and VII; to set aside the entire proceedings in terms of Annexures I, IV, VI and VII and restore things, as it stood prior to the above proceedings; to restrain respondents from proceeding ahead with Annexures I, IV, VI and VII. IA No.179/2016 was filed by the auction purchasers, viz., respondents 3 to 5 to hear and decide the maintainability of the said SARFAESI Application.

Annexure-I is the demand notice dated 31.5.2006. Annexure-IV is the notice dated 14.8.2006 to take possession on 23.8.2006. Annexure – VI is the publication of possession notice in the newspaper Malayala Manorama dated 1.9.2006 and Annexure- VII is the publication of tender notice in the newspaper Malayala Manorama dated 3.9.2006. When the aforesaid SARFAESI application was pending, auction purchasers, viz., respondents 3 to 5 filed IA No.179/2016 to hear and decide the maintainability of the SARFAESI Application. Learned Presiding Officer proceeded to hear both the matters and passed orders on the same date i.e., 29.9.2018. By the said order, IA No.179/2016 was allowed and TSA No.10/2016 was dismissed. Aggrieved against these orders, aforesaid appeals are filed.

From the records produced, it can be gathered that first appellant availed credit facilities from the respondent bank viz., Union Bank of India. Appellants 2 to 4 are the guarantors. Second appellant created equitable mortgage in respect of 16.20 Ares in RS No.927/10 and 924/1 of Killikolloor Village and 71.25 cents of land along with residential building having an area of more than 10,000 sq.ft. located at RS No.48/2 of Kollam West village with the first respondent bank. Appellants 3 and 4 created equitable mortgage in respect of 1.40 Ares of land and building in RS No. 113 and 121 of Kollam East village. These mortgages had been executed for the due repayment of loan availed by the first appellant.

Appellants had taken grounds, challenging the possession notice and other SARFAESI measures, such as, sufficient opportunities were not given to the appellants to repay the loan due, violation of mandatory provisions of SARFAESI Act, claim of excessive loan amount, under-valuation and sale of secured assets which are high value properties, to the whims and fancies of the bank for a low price. IA 179/2016 was filed by auction purchasers, primarily, on the ground that SA was filed only to challenge the possession notice and the tender notice. Auction was held on 5.10.2006, possession was taken on 31.5.2007. There was no prayer for challenging the sale. After the sale, IA No.1791/2006 was filed to set aside the sale. That application was dismissed by the Learned Presiding Officer on 3.4.2007 stating that the challenge to the sale will be decided in the SA. Thereafter, appellants did not prefer to file a fresh SA, challenging the sale or issuance of sale certificate. Therefore, the SA as filed, is not maintainable and prayed for deciding the maintainability of the SA. As already stated, this IA was allowed and the TSA was dismissed.

Learned Senior Counsel Shri P.B. Krishnan for appellants submitted that,

Section 13(2) Notice ought to have been issued to Smt. Dhanalakshmi, who had availed credit facilities and term loan, referring to three items of immovable properties with full description and one movable item. Annexure-I refers to only one item of property. Guarantors who own three items of properties and created mortgage were not given a valid notice. No notice was given to V. Ramachandra Reddiar and Ananthakumar. Notice intended for Veeresh Kumar was issued to R. Veeriah Kumar.

Possession Notice was issued to the principal borrower and to all the guarantors. Notice dated 14.8.2006 was dispatched on 23.8.2006 and delivered on 25.8.2006. The delay was deliberate and the possession was to be taken between 10.00 am and 5.00 pm on 23.8.2006.

Possession notice was issued in respect of four items of property, which were not included in Section 13(2) Notice.

Possession Notice was not issued as per the format described under Section 13(4) read with Rule 8(1) and Rule 8(2) of Security Interest (Enforcement) Rules, 2002 and Appendix IV of the Rules. Boundaries of the properties are not described in the notice.

Possession notice as per Appendix-IV was not served and delivered to the borrowers and guarantors. Therefore, possession notice issued would not satisfy the requirement of serving notice to the borrowers under Rule 8(1) of SIE Rules.

Possession notice published in newspapers on 1.9.2006 is materially different from the one affixed on the property.

Of the 3 modes of service of possession notice, only 2 modes were attempted. Even they were defective and not in sufficient compliance with SIE rules. Failure to serve possession notice by registered post or in person is fatal.

Property is shown as abutting the National High Way on the southern side and lying as rectangular plot. It was valued at Rs.1.80 crores in the year 1999 at the time of sanctioning the loan. Valuation of the land was about Rs.1.18 crores and the building value was about Rs.57.60 lakhs.

Land value was fixed at Rs.78.37 lakhs in 2006 and value of residential building of 1020 sq.meters (More than 10,000 sq.ft) was valued at Rs.37.97 lakhs. Thus, the same property was valued at Rs.1.16 crores in the year 2006. The property was deliberately valued low. In the absence of proper valuation, upset price fixed in the tender notice was very low.

Tender notice dated 29.8.2006 preceded the compliance of 3 modes of serving possession notice, as per Rule 8(6) and 8(7) of SIE Rules. Tender notice was issued on 29.8.2006, even before making publication of possession notice on 1.9.2006. Fabricated record is produced to suggest that service of tender notice on borrowers and guarantors by personal service. This claim is refuted by production of medical records of Appollo Clinic, Bangalore.

Tender Notice was dated 29.8.2006 and the last date for submission of tender was 20.9.2006, that means, less than 30 days notice was given for submission of the tender. Name of the borrower is not stated in the tender notice. All the three properties were sought to be sold by fixing a meager upset price. Boundaries of the property are not described. Residential building measuring more than 10,000 sq.ft. is not properly described.

Tender Notice provides for negotiations, a concept alien to sale by tender provided in the Rules. Time for payment of balance amount was fixed as 30 days instead of 15 days specified under Rule 9(4) of SIE rules. There is no service of notice by 3 modes, viz., personal service, affixture and publication.

Sale was confirmed on 5.10.2006 and the balance 75% was paid only on 31.3.2007, which came to the notice of the borrowers/guarantors only when OA 56/2008 was filed on 30.1.2008. Wrong representation was made with regard to payment of balance sale price and that resulted in non-extending the interim order granted in favour of the appellants by the learned Presiding Officer. Since the balance sale consideration was not paid within 15 days of confirmation of sale, sale held is void. There was no extension of time in writing among parties for payment of balance sale consideration. Agreement for extension of time has to be entered into between the parties i.e., borrowers, bank and the auction purchaser. However, there was no such agreement in writing for extension of time for paying the balance sale consideration.

Sale was conducted and confirmed on 5.10.2006 in favour of Shahid Ahmed. A per paragraph 2 of the written statement, sale was confirmed in favour of Shahid Ahmed, Smt. B.S. Rajammal and Dr. Mumthaz Yusaf and the tender was submitted by Shahid Ahmed. Sale certificate refers only two persons, but confirmation of sale refers to three persons.

Tender Notice was issued even before the publication of possession notice. It is a clear irregularity, which goes into the root of the matter and vitiates the entire proceedings. Sale Certificate was issued in favour of Smt.B.S.Rajammal and Shahid Ahmed but the property was partitioned into two schedule items. Item No.1 was assigned to Smt. Rajammal and Item No.2 to Shahid Ahmed, describing them, as purchaser of each item.

It is contradictory to the procedure for sale of immovable property. Bank owes judicial duty to secure maximum price in its capacity as Trustee. However, without doing that, bank had violated all the mandatory provisions of SARFAESI Act by

Tender notice was issued from the Registered Office of Union Bank of India, Thiruvananthapuram, Possession Notice was issued from the Central Office of Union Bank of India at Kollam and the publication of possession notice was issued from the Regional office at Trivandum, which is violative of Rule 8(1) of SIE rules.

Canvassing on all these grounds, learned senior counsel for the appellants prayed for setting aside the orders of the learned presiding officer and allow both appeals. Learned Senior Counsel for appellants pressed into service the following decisions in support of his submissions.

Decision of Hon’ble Supreme Court of India, in re, Mardia Chemicals Vs. Union of India, reported in AIR 2004 SC 2371 is relied for the proposition that, it is necessary to communicate the reasons for not accepting the objections raised by the borrower in reply to notice under Section 13(2) of the Act and that the authorized officer has to obtain the valuation of immovable property and fix the reserved price. Only thereafter, a notice of 30 days before sale is to be served on the borrower.

Decision of Hon’ble Supreme Court of India, in re, Mathew Varghese Vs. M. Amritha Kumar and others reported in 2014 (5) SCC 610 relied for the proposition that when the secured creditor is given a free hand to resort to the sale of the property without approaching the Court or the Tribunal, mandatory procedures under the SARFAESI Act and the rules made thereunder have to be complied. Thirty days notice should be given prior to the date of sale to the borrower.

Decision of the Hon’ble Supreme Court of India, in re, G.M. Sri Siddeshwara Co-operative Bank Ltd. and another Vs. Ikbal and others reported in 2013 (10) SCC 83 is relied for the proposition that compliance of Rule 9(1) and 9(3) of SIE Rules, 2002 is mandatory with regard to sale and payment of 25% of sale price. As regards, payment of balance purchase price, the said amount has to be paid by the purchaser on or before 15^th day of confirmation of sale or such extended period, as may be agreed upon in writing between the parties. Rule 9(4) does not describe any particular form of written agreement except the fact that it must be in writing. The term, ‘written agreement’ means a mutual understanding or an arrangement about relative rights and duties by the parties. Nothing more than a manifestation of mutual assent in writing. The word ‘parties’ for the purposes of Rule 9(4) means the secured creditor, borrower and the auction purchaser.

Decision of Hon’ble Supreme Court of India, in re, Ram Kishun and other Vs. State of U.P. and others reported in 2012 (11) SCC 511 is relied for the proposition that, in the matter of sale of property, the dominant consideration is to secure the best price for the property to be sold. This can be achieved only when there is maximum public participation in the process of sale and everybody has the opportunity of making an offer. Essential ingredients of such sale require correct valuation report and fixing reserve price. In case, proper valuation is not done and reserve price fixed on the basis of inaccurate valuation report, the intending buyers may be come forward, treating the property as not worth purchase by them. Moneyed person or a big businessman may not like to involve in small sales/deals. Authority concerned must exercise application of mind in approving/accepting the report of the approved valuer and fixing the reserve price. Failure to do so would result in substantial injury to the borrowers/guarantors and that would ultimately amounts to material irregularity and vitiate subsequent proceedings. Authorities are duty bound to decide as to whether sale of a part of the property would meet the outstanding due. Recovery of public dues must be made strictly in accordance with the procedure prescribed by law. Liability of the surety is co-extensive with that of the principal debtor. In case there are more than one surety, liability is to be divided equally among the sureties for unpaid amount of the loan. Once sale has been confirmed, it cannot be set aside unless fundamental procedural error had occurred or sale certificate had been obtained by misrepresentation or fraud.

Decision of Hon’ble High Court of Madras, in re, M. Rajendran Vs. Authorised officer, Corporation Bank and others, is relied for the proposition that non compliance of mandatory Rule 8(7) of SIE Rules, would render the sale invalid. Rule 8(7) deals with affixture of sale notice on the conspicuous part of the immovable property. If that is not done, sale would be rendered invalid and is liable to be set aside.

Decision of Hon’ble High Court of Kerala in re, Unnikrishnan K.T. Vs. Authorised Officer, UCO Bank, Ernakulam and others reported in 2018 (1) KLT 990 is relied for the proposition that, secured asset cannot be disposed of in a casual or light hearted manner. Secured creditor is a trustee and he cannot deal with the property in any manner it likes. Wide powers have been conferred on banks and financial institutions under the Act to realize the amounts due to them, including taking possession and sale of the property. Every wide power, the exercise of which, has far-reaching repercussion, has inherent limitation on it also. Such powers can be exercised only to effectuate the purposes of the Statutes concerned. The responsibility is far graver in legislations enacted for general benefit and common good. Test of reasonableness is also strict in such cases. The exercise of such powers have to be tested on the touchstone of fairness and justice. That which is not fair and just is unreasonable is arbitrary. There is power to take possession of the property and transfer the same by sale and the Authority has to act cautiously, honestly, fairly and reasonably. Lack of reasonableness or fairness at either of the two stages renders the take over and transfer invalid. Authority should justify the action assailed o the touchstone of justness, fairness, reasonableness and as a reasonable prudent owner. Right to property is a constitutional right protected under Article 300A of the Constitution. No person shall be deprived of his property except by authority of law. Secured Creditor is duty bound to ensure maximum best price is received from the secured asset and that no one is taking advantage of vulnerable position in which borrower is placed on account of the proceedings against him.

Decision of Hon’ble Kerala High Court in re, Veena Prabhakumar and another Vs. Dhanlaxmi Bank, Kollam Branch and another reported in 2019 (3) KHC 268 is pressed into service for the proposition that amendment in SARFAESI Application is permissible under law for impugning the subsequent or consequential actions/measures by the bank. Filing of a fresh Securitization Application, challenging the second sale notice or the further action taken by the bank under Section 14 of the SARFAESI Act, would serve only to proliferate litigation and unnecessarily add to docket numbers. While discerning an amendment application, the fundamental reason to be found d out is whether the application for amendment alters the cause of action or whether it is supplemental. In the former case, the Courts should be much more circumspect in allowing the proposed amendment. While in the later scenario, Courts will generally be relaxed and liberal in considering the amendment application because any pleadings or circumstances, that are intended to supplement the original pleadings or cause of action, should be welcomed, since that will surely help in determining the real issue between the parties.

Decision of the Hon’ble Supreme Court of India in re, Prithi Pal Singh and another Vs. Amrik Singh and others reported in 2013 KHC 3581 is relied for the proposition that if the amendment application is allowed without any rider or condition, it is reasonable to presume that amendment would relate back to the date of filing of suit.

Decision of Hanumanthappa L.C. Vs. H.B. Shivakumar reported in 2015 KHC 4569 is relied for the proposition that, doctrine of relation back will not be applicable if amendment application was allowed expressly subject to limitation.

Decision of DRAT, Chennai in re, Karnataka Bank Ltd. Vs. Mahadeshwara Bricks and others reported in (2025) ibclaw.in.207-DRAT is relied for the proposition that valuation of the property taken at the time of granting loan under secured property has to be taken as a crucial factor, while obtaining valuation at the time of bringing the property for sale. .

Decision of Hon’ble Punjab and Haryana High Court, in re, Bhupinder Sing Vs. State Bank of Patiala reported in 2008 (2) D.R.T.C.701 (P&H) is pressed into service for the proposition that when there was no reason given for difference in the valuation compared to the earlier report and the subsequent report and when the house in question had been sold less than the value given at the time of obtaining loan, sale is liable to be declared as illegal and void.

Decision of Hon’ble High Court of Madras, in re, K. Raamaselvam Vs. Indian Overseas Bank reported in AIR 2010 Madras 93 is relied for the proposition that when the manner of exercising power is laid down, such power is to be exercised in the manner prescribed or not at all as observed in the decision of the Hon’ble Supreme Court in Indian Bank Association s. Dev Kala Consultancy Services.

Decision of Hon’ble Himachal Pradesh High Court, in re, Parwati Devi and another Vs. State Bank of Patiala and others reported in 2018 KHC 4174 is relied for the proposition that when the property sold consists of land and building, when there was no mention about four-storied structure, sale is liable to be set aside. No doubt, public money should be recovered and such recovery should be effected expeditiously, but it does not mean that the financial institution can be permitted to act like property dealers and dispose of the secured assets in any unreasonable or arbitrary manner.

Decision of Hon’ble High Court of Karnataka in re, Krishnegowda K.R. and another Vs. Chief Manager/Authorised Officer, Kotak Mahindra Bank is relied for the proposition that compliance of Rule 8(1) and 8(2) of SIE Rules, 2002 is mandatory and any violation or infraction by the bank can be called in question before DRT and DRT has power to restore possession.

Decision of Hon’ble Supreme Court of India, in re, Om Sakthi Sekar Vs. V. Sukumar and others in Civil Appeal No.3362/2026 is relied for the proposition that “there can be no quarrel with the settled proposition that the rights of a bona fide auction purchaser deserve due protection and that confirmed court sale should not be ordinarily be inferred with. It is equally well established that such protection is not absolute. Where credible issues are raised regarding the adequacy of valuation or the fairness of the process leading to the fixation of the reserve price, the supervisory jurisdiction of the Court may be invoked to ensure that the recovery proceedings have been conducted in a manner that secures the best possible value of the property. The objective of recovery proceedings is not merely to complete the sale but to realize the maximum value of the secured asset as to balance the interests of the creditors and the borrower”.

Decision of the Hon’ble High Court of Madras in Writ Petition No.32958 and 32016/2022 is relied for the proposition that bank cannot remain silent to confirm the auction and get the balance sale consideration with delay as it is violative of the decision of Hon’ble Supreme Court of India in re, Mathew Varghese Vs. M. Amritha Kumar and others reported in (2014) 5 SCC 610. It is also observed that balance 75% of the sale consideration was not realized and credit into the loan account within the prescribed period of time limit and there was a huge delay of 15 months, while interest is mulcted in the borrowers account. Ultimately, the sale held in favour of the auction purchaser was declared as invalid. When this decision is taken on appeal before the Hon’ble Supreme Court of India in SLP (C) Nos.8850 and 8851 of 2023, Hon’ble Supreme Court of India, in complete agreement with the Hon’ble High Court dismissed the said SLPs.

Learned Counsel for respondents 1 and 2 submitted that,

Decision of Hon’ble Supreme Court of India in re, Bank of Baroda and another Vs. M/s Parasaadilal Tursiram Sheetgraph Pvt. Ltd and others reported in 2022KHC 6792 is produced for the proposition that the reason for providing time limit of 45 days for filing the application under Section 17 of the SARFAESI Act has to be inferred from the purpose and object of enactment.

Decision of Hon’ble Karanataka High Court in re, Kailasam P. Vs. Karnataka Bank Ltd. reported in 2025 KHC 3649 is produced for the proposition that DRT is not a conventional Civil court having inherent power to condone delay under Section 5 of the Limitation Act. Therefore, Section 5 of the Limitation Act is not applicable to the provisions of the SARFAESI Act.

With regard to setting aside the sale, after confirmation of sale, it is held in paragraphs 212 to 219, as follows:

Learned Senior Counsel Shri Anil Xaviour for the auction purchasers i.e., R3 to R5 submitted that challenge in the SARFAESI application was to 13(2) Demand Notice, 13(4) Possession Notice and the Tender Notice. In Writ Petition No.24839/2006 filed, conditional order was passed by the Hon’ble High Court of Kerala towards OTS and that was not complied by the appellants. Writ Appeal No.1802/2006 against the order passed in Writ Petition No.24839/2006 was also dismissed. Only thereafter, SARFAESI application was filed challenging only Section 13(2) Notice and possession notice. Hon’ble High Court of Kerala passed an order in Writ Petition No.24839/2006 empowering the bank to proceed further without issuing fresh notice, if the conditional order passed by the Hon’ble High Court was not complied. Sale was held on 5.10.2006 and was confirmed in favour of R3 to R5. Against the order passed in IA No.1691/2006, appeal in IN(SA) No.597/2007 was filed by the appellants before this Tribunal and that was dismissed. Before completion of sale on 5.10.2006 and issuance of sale certificate on 11.6.2007, appellants had not taken any steps to pay the loan amount and redeem the property. Appeal filed by the appellants in MA (SA) No.197/2006 before this Tribunal against the order vacating the stay in IA 1659/2006 was dismissed on 13.11.2006. Amendment application was filed after three years and 7 months. On 19.3.2013, amendment petition was allowed and amendment was carried out on 17.9.2015. Technically, there is no valid amendment and the amendment was barred by limitation. On 2.12.2016, DRT dismissed the TSA 10/2016 (SA 66/2006). Hon’ble High Court of Kerala passed an order of remand in OP (DRT) No.120/2016. Thereafter, DRT passed order on the maintainability of the SA and also on the merits of the SA.

In support of his submission that amendment is not maintainable, he pressed into service, the following decisions.

Ld. Counsel for the auction purchasers R3 to R5 relied on the decision in re, Pahwa Buildtech Pvt. Ltd. Vs. Jagmohan Singh Arora and others reported in CDJ 2022 DHC 878 for the proposition that SARFAESI action cannot be held to be bad in law merely on raising trivial objection, which has no legs to stand unless a person is able to show any substantial prejudice is caused on account of the procedural lapse. This decision is also relied for the proposition that payment by cheque, which is realized subsequently, relates back to the date of receipt of the cheque and, in law, the date of delivery of the cheque is considered as the date of payment. The scope of SARFAESI Act is to allow faster recovery of the debt by the secured creditor without interference of the court. Therefore, sale of the secured asset should not be interfered lightly by any Tribunal or court.

I have considered the rival submissions and perused the records.

During the course of hearing of this Appeal, it was informed that original application in SA No.66/2006 was missing, therefore, it was reconstructed on the basis of original paper book supplied to the bank. An endorsement to that effect is found at page 11 of Volume I of typed set of papers filed by the appellants.

The grounds made in the SARFAESI Application in brief, are that,

Though in the amendment application, there is a plea raised that it is highly necessary that appellant be permitted to amend the SARFAESI application after incorporating the relief for setting aside the sale and also seek to incidental reliefs including compensation, no such payer was sought to be amended in the SARFAESI application.

The grounds are extracted in brief to understand the nature of grounds taken and to highlight that even in the amendment application, there was no prayer sought for setting aside the sale. Therefore, SARFAESI Application remains without the prayer to set aside the sale on the grounds raised in the original as well as amended SARFAESI application.

Now, this Tribunal will consider the grounds raised one after the other.

First appellant is the borrower. Deceased second appellant and 3rd and 4^th appellants are husband and children of the first appellant and are guarantors.

Deceased second appellant executed mortgage in respect of 16.20 Ares in RS No.927/10 and 924/1 of Killikolloor Village and 71.25 cents with residential building in RS No.48/2 in Kollam West village. 3^rd and 4^th appellants mortgaged 1.40 ares in RS No.113 and 121 in Kollam East village.

Demand Notice dated 31.5.2006 issued to Veeresh Kumar demands outstanding due of Rs.1,95,42,886/- together with contractual interest from 1.5.2006. An extent of 1.40 Ares of land and building in RS No. 113 and 121 of Kollam East village is shown as secured asset. Demand Notice dated 31.5.2006 addressed to Dhanalakshmi, Proprietrix, M/s Seemati Textiles, claims the same amount as due. However, in this Notice, three properties are shown as secured assets. They are a) 16.20 Ares in RS No.927/10 and 924/1 of Killikolloor Village b) 1.40 Ares of land and building in RS No. 113 and 121 of Kollam East village and c) 71.25 cents of land along with residential building having an area of more than 10,000 sq.ft. located at RS No.48/2 of Kollam West village.

After receiving this notice, reply was sent by R.Dhanalakshmi. The gist of the reply is, “periodical payments have been made towards the loan account. Under the circumstances, it is not known as to how a sum of Rs.1,95,42,886/-is claimed as due. Details are sought by giving a copy of the up-to-date account statement. It was also further stated that some of the properties were sought to be sold and they are looking for buyers. There have been considerable fall in the business. They are trying to get over the situation, sought permission and time upto 28.2.2007. Requested to give concession in the matter of interest”. This letter is undated and unsigned.

Respondent bank sent a reply to the letter dated 29.7.2006 addressed to Ramachandra Reddiar on 7.8.2006. It is said that Ramachandra Reddiar can obtain account statement from the Branch and necessary instructions had been given to issue up-to-date statement. It is further stated that, “Since neither the dues are settled nor submitted any concrete proposal for early settlement, bank was not in a position to postpone further action under the SARFAESI Act”. Letter dated 29.7.2006 purported to have been sent by Ramachandra Reddiar is not made available before this Tribunal.

Though there is ground raised with regard to charging of excessive interest and not considering the payments that had been made by the appellants, etc., this plea is not supported by any evidence as to how the excessive interest was calculated and what are the payments made and not considered by providing corroborative evidence of the alleged payments made. Therefore, this Tribunal finds that there is no merit in the claim of the appellants that excessive interest was charged and payments made towards the loan due were not considered.

When materials produced establish that Section 13(2) notice dated 31.5.2006 was served on the borrowers and the guarantors and in fact borrowers and guarantors have sent their objections to the demand Notice and their objections were also replied by the bank, the objection raised with regard to demand notice is rejected as untenable.

There are three possession notices found at pages 5, 6 and 7 of Volume I of typed set of papers. Possession Notice dated 14.8.2006 addressed to Ms. Dhanalakshmi informs that, “Dhanalakshmi has to hand over possession of aforesaid 3 secured assets on 23.8.2006 between 10.00 AM and 5.00 Pm. This notice was marked to 1) R. Veeresh Kumar 2) Ramachandra Reddiar and 3) Ananda Kumar. There are two more possession notices dated 23.8.2006 issued in respect of 71.25 cents of land along with residential building having an area of more than 10,000 sq.ft. located at RS No.48/2 of Kollam West village and 1.40 Ares of land and building in RS No. 113 and 121 of Kollam East village, informing that on failure of the borrower to repay the loan amount, Authorised Officer took possession of the property on 23.8.2006 in terms of the power conferred under Section 13(4) read with Rule 8 of SIE Rules. This possession notice was published in English Newspaper on 1.9.2006.

It is true that there is no provision mentioned in the possession notice dated 14.8.2006. However, this notice makes it clear that there is an outstanding of Rs.1,95,42,886/- and the demand was made to pay this amount. Despite demand notice and expiry of 60 days, this amount was not paid. Thus, borrowers and guarantors were informed that possession will be taken between 10.00 am and 5.00 pm on 23.8.2006. Possession notice dated 23.8.2006 was, in fact, a notice intimating about taking possession of the secured asset on 23.8.2006. this notice dated 23.8.2006 was published in the English Newspaper, ‘The Hindu”. This Tribunal finds that in typed set of papers produced by both parties, proof of service of possession notice dated 14.8.2006 like acknowledgement card, proof of affixture of possession notice on the secured asset and proof of publication of possession notice in vernacular language are not produced. It is pertinent to mention here that Learned Presiding Officer, DRT-II, Ernakulam on 6.8.2016 directed the respondent bank to produce Section 13(4) Notice, its postal receipts, acknowledgment, newspaper publication, copy of tender notice intimation, its receipts and acknowledgment. It appears that respondent bank had not produced these documents.

However, appellants admitted in the SARFAESI application about the receipt of possession notice dated 14.8.2006. There is no specific pleading in the SARFAESI application as to non affixture of possession notice and failure to publish possession notice in vernacular language. Thus, it can be concluded that bank has substantially complied with service of possession notice to the borrowers/guarantors.

Tender notice dated 29.8.2006 shows that all the aforesaid three properties were sought to be sold by inviting sealed tenders. Upset price and EMD for each property was given. Last date of receipt of tender notice was fixed on 20.9.2006 before 5.00 PM and date of sale was on 5.10.2006 in the presence of tenderers at 11.00 AM. Interested parties were required to send their consolidated tenders along with EMD by Demand Draft/Pay Order. Successful bidder has to remit 25% of the bid amount on the auction date and the balance amount has to be remitted within one month from the date of the auction.

Learned Counsel for the appellants raised two issues on this Tender Notice.

Ground raised with regard to service of tender notice is that it is not served as required under Rule 8 and 9(1) of SIE Rules, 2002. There is no specific pleading with regard to non-service of tender notice through post or by other means personally to the borrower and the guarantor. Pleadings mostly centred on undervaluation and excessive sale. Tender Notice dated 29.8.2006 said to have been received by the appellants is produced in the type set. Publication of the tender notice in “The Hindu’ English newspaper and in vernacular language is also produced. However, there is no proof of affixture of tender notice on the secured asset is produced.

Respondent bank submitted that tender notice had been served to the appellants when they approached the bank on 1.9.2006 after seeing the publication of the possession notice (pleaded in the additional written statement). A copy of the tender notice with signature of the appellants, R. Dhanalakshmi and her deceased husband Ramachandra Reddiar, in proof of receipt of tender notice is produced by the respondent bank. This document is disputed by the appellants claiming that on the date of alleged personal service of the tender notice when appellants said to have visited the bank on 1.9.2006, they were in Bangalore and not in Kerala. In support of this claim, appellants produced the prescription given by Dr. Sachitha Abraham, Bangalore on 1.9.2006 in favour of appellant Ramachandra Reddiyar and the prescription given by Dr. R.A. Vijayavardhan dated 1.9.2006 to the appellant R Dhanalakshmi. He also produced cash bill dated 3.9.2006 to show that blood test was done in Bangalore and lab report dated 3.9.2006. These prescriptions, receipt and lab result issued by Microbiology Laboratory will not conclusively establish that appellants were in Bangalore on 1.9.2006. Bangalore can be reached from Kerala in time to get the blood test done on 3.9.2006. Any willing Doctor can give such prescriptions. If the appellants claim that they had not received tender notice in person from the bank, it must have been pleaded in the amended application. However, no such pleading is made. Appellants had not taken steps to send the disputed signature to the hand writing Expert’s opinion. Therefore, this Tribunal is of the view that tender notice was personally served on the appellants R. Dhanalakshmi and Ramachandra Reddiar. As already stated, proof of affixture of tender notice on the secured asset is not produced, through personal service and publication in newspapers is proved.

Appellants filed IA No.1659/2006 for stay of further proceedings in pursuance of Annexures A-VI and A-VII until disposal of the SARFAESI application. The Order of Learned Presiding Officer dated 10.10.2006 reads that, “ issuance of sale certificate, if not issued, will be kept in abeyance by respondent bank till 18.10.2006.“

It is the contention of the learned counsel for appellants that on the basis of wrong information given by the respondent bank and in the counter filed in IA 1659/2006 that auction purchasers deposited sale amount of Rs.1,19,15,123/-and sale had been confirmed on 5.10.2006, prayer for extension of interim order was not considered by the Learned Presiding Officer on 17.10.2006. Against the order passed in IA 1659/2006, appellants filed Appeal in MA (SA) 197/2006 before this Tribunal and that was dismissed for non payment of pre-deposit on 13.11.2006.

As per the written statement filed by the bank, it was stated that, “ sale was confirmed on 5.10.2006 in favour of Shahid Ahmed in paragraph 1 of the written statement. However, in paragraph 2, it was stated that sale in respect of 71.25 cents in RS No.48/2 of Kollam West village was confirmed in favour of Sahid Ahmed, Smt. B.S. Rajammal and Dr. Mumthaz Yusaf.” There is contradictory statement as to whom the sale was confirmed, whether in favour of Sahid Ahmed or in favour of Sahid Ahmed, Rajammal and Dr. Mumthaz Yusaf. Sale proceedings is not produced in the same to show how many tenders had been received, what was the offer price quoted by the tenderers, whether the aforesaid persons jointly submitted their tender and whether the price quoted by the aforesaid persons was the highest offer. Production of sale proceedings is necessary to find out whether the sale was held as per the tender notice.

Letter dated 16.10.2006, written by Shri Shahid Ahmed, Rajalakshmi and Dr. Mumthaz Yusaf to the Authorised Officer of Union Bank of India shows that, “ on the date of sale itself, they paid 25% of the sale price amount of Rs.29,78,762/- and that they are making payment of balance 75% being Rs.89,36,341/- through cheque No.855350. It was further stated that respondent bank to make every possible effort to end pending litigation and make it possible for the bank to put them in actual physical possession of the property and building at the earliest along with issuance of sale certificate and bank may encash the cheque after bringing the litigation to an end and also with due intimation to them”.

In the counter filed in IA 1792/2006, an application filed to call for the entire records from the bank with regard to alleged sale of 71.25 cents in RS No.48/2 in Kollam west village and also to furnish all details with regard to payment of auction amount of Rs.1,19,15,123/- by the successful bidder, bank stated that “since the sale was confirmed in favour of the highest bidder, the highest bidder deposited a sum of Rs.29,78,782/- being 25% of the sale amount on the same date. Thereafter, bank gave the bidder 30 days time for paying the balance amount through a letter. Meanwhile, appellants approached the Hon’ble High Court of Kerala as well as Tribunal and the matter was pending for consideration by the Tribunal. Purchasers requested some more time to pay the balance sale price, but, the bank had not given any final reply since the matter was pending before the Tribunal. Purchasers assured the bank that they would pay the balance amount as soon the proceeding is over and bank is in a position to put them in vacant possession of the property. Official Receiver attached to the Sub-Court, Kollam gave notice to the bank stating that a portion of the property sold by the bank comes within his possession as a receiver. The dispute regarding that has to be resolved. Since bank was not in a position to put the purchaser in possession of the property, bank had not called upon the purchaser to deposit the balance amount due from them.” This counter was filed on 11.12.2006. Therefore, it is clear from the counter that till 11.12.2006, even after completion of one month from the date of sale, bank had not received the balance sale consideration. In the counter filed in IA 1281/2008, bank admitted that balance sale consideration of 75% was transferred to the account of the bank only on 31.3.2007. Sale was held on 5.10.2006. Thus, it is established that on the basis of false information submitted by the bank that the auction purchaser deposited the balance sale amount of Rs.1,19,15,123/- and the sale was confirmed on 5.10.2005, the learned Presiding Officer had not extended the interim order.

As per Rule 9(4) of SIE Rules, 2002, that was in force in the year 2006, sale price shall be paid by the purchaser to the Authorised Officer on or before 15^th day of confirmation of sale of the immovable property or such extended period as may be agreed upon in writing between parties. As per the decision laid down by the Hon’ble Supreme Court of India, in re, G.M. Sri Siddeshwara Co-operative Bank Ltd. and another Vs. Ikbal and others reported in 2013 (10) SCC 83, the word ‘parties’ for the purpose of Rule 9(4) would mean secured creditor, borrower and the auction purchaser.

In the year 2016, the words “as may be agreed upon in writing between parties” was substituted with words “as may be agreed upon in writing between the purchaser and the secured creditor, in any case, not exceeding 3 months.” For proper understanding, the Rule 9(4) that was in force in the year 2006 is extracted hereunder.

As per Rule 9(4) of SIE Rules, balance sale consideration should be paid within 15 days from the date of confirmation of sale. Contrary to this, tender notice gives for one month time from the date of action to pay the balance sale price. It is again in violation of the mandatory provision of Rule 9(4) of SIE Rules.

In the case on hand, there was no agreement in writing among the borrower, auction purchasers/successful bidders and the bank, permitting the payment of the balance sale consideration beyond the period of 15 days or 30 days as per tender notice. Successful bidders cannot say that bank can realize the cheque amount after putting them in possession. Payment through cheque, unless it is encashed within timeline, cannot be considered as proper and valid payment. As seen from the account statement, balance sale price was not realized through cheque payment, but was transferred from the account of the successful bidder.

The details of payments are as follows:-

The submission of learned Counsel for the respondents that since the balance sale consideration is paid through cheque within 30 days, it satisfies the requirement of paying balance sale price as per Rule 9(4) of SIE Rules, 2002, cannot be accepted for the reasons that cheque was not at all presented for collection. Balance sale price was transferred through money transfer from the account of successful bidder after 5 months. There is no agreement in writing among the borrower, bank and successful bidder for extension of time for balance payment of sale price. Thus, it is apparent that balance 75% of sale consideration was not paid in time, as mandated under law and it is violation of Rule 9(4) of SIE Rules, 2002.

The sale certificate issued in favour of the successful bidder dated 11.6.2007 shows that property scheduled in the SA and sold to three persons was divided among them in Schedule I and Schedule II. Schedule I was allotted to Rajammal and Schedle II was allotted to Shahid Ahmed. It appears that there was no allocation of property to Dr. Mumtaj Yusaf. A close reading of the sale certificate shows that name of Dr. Mumtaj Yusaf is not mentioned in the sale certificate as a successful bidder. It is just stated that property was sold in favour of one Rajammal and Shahid Ahmed, contrary to the plea taken in the written statement that the property was sold to Rajammal, Shahid Ahmed and Mumtaz Yosuf. It shows that the property said to have been purchased by three persons in a sale through inviting tenders, confirmed in favour of three persons, the sale certificate was issued in favour of two persons by dividing the property into two schedules. Such kind of division and apportioning is not contemplated in the SARFAESI Act and the Rules. How is that sale certificate was issued only in favour of two persons, when sale was confirmed in favour of three persons? There is violation in issuing sale certificate.

IA No.1691/2006 filed for issuing Commission to inspect the three items of property and file report regarding location and market value was dismissed by the Learned Presiding Officer on 11.7.2007. Against the dismissal order, appellants filed IN(SA) 597/2007 before this Tribunal and that was dismissed for non compliance of pre-deposit.

It is submitted by Learned Counsel for the respondents that IA 1691/2006 filed by the appellants for issue of Commission to inspect the property and file a report regarding the market value and location was dismissed and the appeal filed against that order was also dismissed and therefore appellants cannot agitate the issue of valuation in the SARFAESI proceedings and in this Appeal. He further submitted that the principles of Res Judicata would apply at two stages of the same proceedings. In support of this contention, he relied on the decision of Hon’ble Supreme Court of India, in re, Sulthan Said Ibrahim Vs. Prakasan reported in 2025 KLT Online 2014 (SC).

There is no dispute with regard to the legal proposition that the principles of Res Judicata would apply in two different stages of same proceedings. That does not prevent this Tribunal from considering the issue of valuation from available records that had come into existence prior to filing of IA 1691/2006.

One of the main grounds taken in the Securitization Application both in amended/unamended application is that the property sold was grossly undervalued and sold for a low price. Appellants produced a copy of the Sale Certificate issued by Kerala Financial Corporation in connection with the sale of the property measuring 49.173 cents in Kollam West village on 25.11.2006 for a sum of Rs.1,40,10,000/-. There are two valuation reports available, one dated 4.9.1999 probably got at the time of availing loan facility and another report dated 24.8.2006, got prior to sale of the property on the basis of which reserve price was fixed. Both these reports were secured by the bank from an approved valuer.

As per the valuation report dated 4.9.1999, two lands and two buildings were valuated at Rs.1,80,00,000/-. Total extent of land was 74 cents. As per the valuation report dated 25.8.2006, 71.25 cents of land and building was valued at Rs.1,16,36,840/- as market value and at Rs.1,15,00,000/- as forced sale value. From 1999 to 2006, certainly value of the land, if not the value of the building, would have increased at least by 20%. However, value of land and building was assessed low in the year 2006. Valuer has said in his 2006 report that value of the land was estimated based on the prevailing trend and recent sale instances of the land with almost similar characteristics of the subject land. However, there is no indication of details of sale instances that were considered by the valuer, are given in the report.

It is not known whether valuer of the report dated 24.8.2006 was informed about the previous valuation dated 4.9.1999. 71.25 cents of land in 1999 was valued at Rs.1.14 crores, with land and building it was valued at Rs.1,71,60,000/-. It is apparent that valuation of the land and building is not scientifically done based on the market value and considering the earlier valuation report when valued in 2006. Thus, there is merit in the contention of the learned counsel for the appellant that property was grossly undervalued.

Appellants filed Writ Petition No.18612/2007 on the file of Hon’ble High Court of Kerala to set aside Ex.P3 Valuation Certificate. Hon’ble High Court in its Order dated 26.11.2011 gave liberty to the appellants to agitate this issue before the appropriate Forum. It appears that appellants had not filed any separate application to set aside the Ex.P3-valuation certificate, except raising grounds in the Securitization Application.

Appellants have been consistently pleading that property was not properly valued, to get the best price. It was also pleaded that Authorised Officer had not determined the extent of the property required to be sold to realize the debt due. Instead, he proceeded to sell more than the extent of land with building then what is required for realizing the loan due and that too, for a low price. This pleading has been taken in the main SARFAESI application and in the amended SARFAESI application.

We have seen that learned Counsel for appellants and respondents produced several decisions on the valuation of the property, fixing reserve price, sale of the property, grounds for challenging the sale and the need to protect the interest of borrower, auction purchaser and the bank. The gist of those decisions are,

When secured creditor is given a free hand to resort to the sale of the property without approaching the Court or Tribunal, mandatory procedures under the SARFAES Act and the Rules made thereunder have to be complied ( in re, Mathew Varghese Vs. Amritha Kumar and others reported in 2014 (5) SCC 610)

Payment of balance purchase price has to be paid by the purchaser on or before 15^th day of confirmation of sale or such extended period, as may be agreed upon in writing between the parties i.e., the secured creditor, borrower and the auction purchaser (in re, Siddeswari Co-operative Bank Ltd. and another Vs. Iqbal and others reported in2013 (10) SCC 83)

In the matter of sale of property, dominant consideration is to secure the best price for the property sold and for that proper valuation has to be done and reserve price fixed, failure to do so would result in substantial injury to the borrower/guarantor and that would ultimately amounts to material irregularity and vitiate subsequent proceeding (in re, Ram Kishun & Others Vs. State of UP and others reported in (2012) 11 SCC 511).

Non-compliance of mandatory Rule 8(7) of Security Interest (Enforcement) Rules, 2002 i.e., affixture of sale notice on the conspicuous part of the immovable property would render the sale invalid and liable to be set aside. (in re, M. Rajendran Vs. Authorised Officer, Corporation Bank and others reported in 2012 AIR Mad.21)

Secured asset cannot be disposed in a causal or light-hearted manner. Secured Creditor is a Trustee and it cannot deal with the property in any manner it likes. Right of the property is a constitutional right. Secured Creditor is duty bound to ensure maximum best price is secured from the secured asset and that no one is taking advantage of the vulnerable position in which the borrower is placed on account of the proceedings against him. (in re, Unnikrishnan K.T. Vs. Authorised Officer, UCO Bank, Ernakulam and others reported in 2018 (1) KLT 990).

Valuation of the property taken at the time of granting loan has to be taken as a crucial factor while obtaining valuation at the time of bringing the property for sale (in re, Karnataka Bank Vs. Mahadeshwara Bricks and others reported in (2025) ibclaw.in.207-DRAT, Chennai)

When the manner of exercising power is laid down, such power is to be exercised in the manner prescribed or not at all (in re, K. Raamaselvam Vs. Indian Overseas Bank reported in AIR 2010 Madras 1993)

Financial Institutions cannot be permitted to act like property dealers and dispose the secured asset in an unreasonable or arbitrary manner (in re, Parwati Devi and another Vs. State Bank of Patiala and others reported in 2018 KHC 4174)

Confirmed Court sale should not be ordinarily be inferred with. Only when credible issues are raised regarding the adequacy of valuation or the fairness of the process leading to the fixation of the reserve price, the supervisory jurisdiction of the Court may be invoked (in re Om Sakthi sekar Vs. V. Sukumar and others in Civil Appeal No.3362/2026)

Decisions of any higher Court would be applied depending upon their applicability to the facts and circumstances of this case. The basic premise is that banks / financial institutions are expected to act as ‘Trustees’, while dealing with the property of the secured debtor. They should make earnest effort to sell the secured interest for a best price to safeguard the interest of the bank and the borrower. Sale should be held by following mandatory procedures. If that is not done, there is no doubt that sale is liable to be set aside.

We have seen from the valuation report of the bank obtained in the year 1999 and 2006 that value of the property was grossly undervalued in 2006. There is no other outside material is required to the aid of this Tribunal to come to the conclusion that property is grossly undervalued. Thus this Tribunal concludes that secured asset in this case was grossly undervalued when compared to the valuation given by the bank’s valuer in the year 1999 and in 2006, depriving the appellants of the best price. In fact, the property was sold for insufficient price.

Appellants filed IA No.1791/2006 to set aside the sale held on 5.10.2006 on the ground that sale is vitiated by fraud, collusion and material irregularity. The main grounds taken in the IA are,

Learned Presiding Officer passed a hand-written order in this application on 3.4.2007. The order reads as follows:

This order makes it clear that Learned Presiding Officer kept open the question regarding the sale and prayer to set aside the sale for the reasons stated in the IA 1791/2006, to be decided in the main SA. It is not the case where the opportunity to challenge the sale was shut once for all. Issue raised in IA 1791/2006 was kept open to be decided in the SA.

Appellants filed IA No.1411/2010 for amendment of the SARFAESI Application and the amendments were sought with regard to conduct of sale, violation of provisions of SARFAESI Act and the Rules made thereunder, taking possession, sale and delivery of possession to the auction purchaser, etc. Detailed averments are incorporated in the amendment application. This amendment application was allowed by the Learned Presiding Officer, as per the proceeding dated 19.3.2013 and the appellants were permitted to carry out amendment. Respondents’ case is that the pleadings sought to be included by way an amendment with regard to sale of the property are barred by limitation. Therefore, the amendment allowed had no force and cannot be considered. However, against the order allowing the amendment application, respondents had not filed any appeal. Auction Purchaser filed IA No.1301/2014 for review of the order passed in the amendment application, along with an IA No.1300/2014 to condone delay of more than 348 days in filing the review application. Auction purchaser also filed IA No.1030/2016 to hear the question of limitation to set aside the sale by way of amendment after 3 years and 7 months, as a preliminary issue. No orders have been passed on these applications. Thus, the order passed in the amendment application became final.

Precedents have been produced by the Learned Counsel appearing for parties with regard to entertaining the amendment application, especially, for amending the relief, which is time barred. Relevant portions of the decisions had already been extracted, supra. The gist of those decisions are extracted hereunder for easy reference.

Amendment application should be filed within the period of limitation, as prescribed under Section 17 of the SARFAESI Act. (in re, B. Ashok Kumar and others Vs. the registrar DRAT, Chennai and others reported in CDJ 2013 MHC 2188)

DRT has no power to entertain the application presented beyond the period of 45 days from the date of impugned measures taken (in re, Joseph A.A. Vs. Hong Kong and Shanghai Banking Corporation Limited reported in 2025 KHC 785)

When the amendment changes the nature of the case, cause of action and prohibited by law of limitation, such amendment cannot be permitted (in re, Rajkumar Gurawara (dead) through Lrs Vs. M/s S.K. Sarwagi & Co. Pvt. Ltd. and another reported in CDJ 2008 SC 1004 )

From the decision of Hon’ble Supreme Court of India in Life Insurance Corporation Vs. Sanjeev builders Private Limited and another reported in 2022 KHC Online 6882 relied by Learned Counsel for R1 ad R2 in a case where amendment was allowed after 27 years from the date of institution of the Suit. Hon’ble Supreme Court of India held that “Amendment can be allowed if it is required for effective adjudication of the controversy between the parties. Delay in applying for amendment alone is not a ground to disallow the prayer. Where the aspect of delay is arguable, prayer can be allowed and the issue of limitation framed separately for decision”.

In the case before hand, we have seen that appellants filed IA 1791/2006 to set aside the sale. Though that application was dismissed, Learned Presiding Officer kept open the question relating to the sale and the prayer to set aside the sale to be decided in the main SARFAESI Application. Of course, application in IA 1411/2010 filed challenging the sale measures was filed after a period of three years and seven months after the sale. That application was allowed on 19.9.2013. Respondents had not filed any appeal against the order allowing the amendment application. Auction Purchaser filed IA 1300/2014 to condone the delay of 348 days in filing Review Application in IA 1301/2014 filed to review the order passed in the amendment application. In both the applications, no order was passed. Auction Purchaser filed IA 1030/2016 to hear on the question of limitation of the application filed to set aside the sale by way of amendment after three years and seven months, as a preliminary issue. Even in this application, no order had been passed. Therefore, order allowing the amendment application had become final. The issue of conduct of sale and prayer to set aside the sale was left open to be decided in the main SARFAESI application and when the amendment application filed challenging the sale proceedings and other irregularities was allowed, this Tribunal is of the view that the issue of conduct of the sale and the prayer to set aside the sale, if the grounds to set aside the sale are made out, can be taken for consideration in this appeal.

Hon’ble High Court of Kerala had also discussed in OP(DRT) 122/2018 that the obvious reason for not challenging the sale was that if the appellants succeed on the grounds taken in the SARFAESI application against the possession notice and the sale notice, subsequent sale would fail and the other reason is that Tribunal passed an order on 3.4.2007 declaring that the validity of sale will be considered at the time of final disposal of the SARFAESI application.

In the original SARFAESI application, apart from challenging the possession notice and the tender notice and to set aside them, there was also a prayer to restrain the respondents 1 and 2 from proceeding ahead with the possession notice and the tender notice.

Thus, This Tribunal is of the view that irrespective of the fact that there is obvious omission of a prayer to set aside the sale, if grave irregularities and violation of the mandatory provisions of the SARFAESI Act are made out in the conduct of sale, the plea to set aside the sale can be considered.

Appellants also filed WPC No.24839/2006 on the file of Hon’ble High Court of Kerala at Ernakulam, challenging the SARFAESI measures. The pleadings and prayers are identical to the pleadings and prayers made in SA. Hon’ble High Court disposed this Writ Petition with certain directions. Appellants were directed to pay to the bank a sum of Rs.10.00 lakhs on or before 30.9.2006 and a further sum of Rs.40.00 lakhs in two equal instalments. Appellants were directed to submit suitable application seeking time to pay the balance amount. If the amounts directed to be paid by the appellants are paid by them, bank was directed to consider the representation of the appellants and pass appropriate orders, in accordance with bank’s policy and guidelines. Till the orders were passed, proceedings were ordered to be kept in abeyance subject to following the conditions. If appellants did not pay any amount as directed, bank was given free hand to continue with the proceedings now initiated without having to issue any fresh notice. This order shows the ground raised in the writ petition was not decided on merits. There were further directions also issued. Against this order, appellants filed Writ Appeal No.1802/2006 before the Hon’ble High Court of Kerala. Hon’ble High Court of Kerala confirmed the order of the Single Judge and dismissed the Writ Appeal.

Union Bank of India filed WPC No.4635/2007 against the District Collector, Kollam, appellants and others for issuance of writ of mandamus to first respondent to evict respondents 2 to 5 and other occupants in respect of 71.25 cents with residential building in RS No.48/2, Kollam West and hand over physical possession to enable the bank to issue sale certificate to respondents 6 to 8 and put them in possession. In WPC No.4635/2007, taking note of the order passed by the Hon’ble Division Bench in WA No.1802/2006, Hon’ble High Court allowed the WP and directed the first respondent District Collector to proceed with further action in respect of exhibit P3 in accordance with.

Against this order, WA No.1250/2007 was filed by the appellant before the Hon’ble High Court of Kerala and Hon’ble High Court passed an order on 1.6.007 and observed that pendency of Writ Appeal will not in any way prevent the respondent bank handing over possession to the auction purchaser and also for issuance of the sale certificate, of course, subject to the result of the Writ Appeal. In the final disposal of Writ Appeal on 7.3.2008, appellants were given liberty to question the action of the bank in alleged taking possession of excess portion of the property other than what was mentioned in the prayer before appropriate Forum.

Learned Counsel for the respondents 1 and 2 pressed into service the decisions as aforementioned with regard to Res Judicata, especially when WPC No.24839/2006 filed with the same set of pleadings and the prayer as pleaded in the TSA 10/2006 and was dismissed and the Writ Appeal 1802/2006 filed was also dismissed. It is submitted that the same issue cannot be agitated in the SA and in this appeal, as they are hit by the principles of Res Judicata. In the considered view of this Tribunal, this submission is not correct. Reason is that WP(C) 24839/2006 had not considered the grounds raised in the Writ Petition on merits. Only as an interim measure, conditional order was passed giving direction to the appellants to make certain payments and on failure to make payments, option was given to the appellants to approach concerned Forum for appropriate relief, viz. DRT/DRAT, which has jurisdiction to decide the matters arising out of SARFAESI Act. Even in the WP(C) 2635/207, though the order was passed for handing over possession to the auction purchaser, in Writ AppealNo.1250/2007, appellants had been given liberty to question the action of the bank against the alleged taking of excess portion of the secured asset. Therefore, this Tribunal finds that the decisions relief by Learned Counsel for R1 and R2 with regard to application of the principles of Res Judicata are not applicable to the facts and circumstances of this case.

From the perusal of records, this Tribunal finds that parties have filed several interlocutory applications during the pendency of the SARFAESI Application. As per the list furnished by the appellants, 33 interlocutory applications have been filed. Except in IA Nos.1659/2006, 1690/2006, 1691/2006, 1791/2006, 1792/2006, 1942/2007, 1411/2010, 179/2016 and 1276/2018, in all other interlocutory applications, no order had been passed. For better appreciation, list of IAs filed in SA No.66/2006 with remarks (filed by the appellants) is produced.

During the first round of litigation, TSA No.10/2016 (SA No.66/2006) was dismissed by the Learned Presiding Officer, DRT-II, Ernakulam on 2.12.2026. Relevant portion of the order is extracted herein.

As per this Order, it is seen that Learned Presiding Officer observed that Hon’ble High Court of Kerala had not found any flaw in the conduct of the sale proceedings. Hon’ble High Court permitted the respondent bank to issue sale certificate to the purchaser, reserved liberty to the appellants to pursue their remedy as against the action of the bank in taking excess portion of the property. Contentions of the appellants as regards non adherence of the provisions of the Act can not be considered as Hon’ble High Court has already permitted the issuance of sale certificate, which cannot be called in question by this inferior Tribunal in the instance proceedings. Thus, it is held that other issues and questions raised in the IAs filed by the parties need not be decided. Tribunal came to the conclusion that appellants had not made out a case warranting allowing of the reliefs sought for and thus dismissed the SA.

Writ Petition referred in the order of the Learned presiding Officer was WP(C) No.4635/2007 filed by the bank to take physical possession of the secured asset. Against the order allowing the said WP, appellants filed Writ Appeal No.1250/2007. In the final disposal of the said Writ Appeal, Hon’ble High Court reserved the liberty to the appellants to question the action of the bank in taking excess portion of the property other than what is mentioned in the prayer portion of the writ petition before appropriate forum. It has to be borne in mind that in Writ Petition No.24839/2006 filed with the same pleadings and prayers as in the SA, Hon’ble High Court passed conditional order as stated therein. There also, liberty was given to the appellants to raise contentions on merits before appropriate Authorities, if the appellants choose to take further proceedings without complying directions. Though Writ Appeal filed against this order in WA No.1802/2006 was dismissed, liberty given to the appellants to raise the issue on merits was not disturbed by the order in the Writ Appeal. Thereafter, TSA No.10/2016 was filed.

Against the order passed in TSA No.10/2016 dated 2.12.2016, appellants filed OP(DRT) No.120/2016 before the Hon’ble High Court of Kerala. Hon’ble High Court after recording the proceedings held thus far, observed Hon’ble Division Bench of the High Court in Writ Appeal No.1250/2007 permitted the appellants to pursue the issue of taking excessive portion of the property by the bank in the SARFAESI application. It was further observed in paragraph 4 of the order, as follows:

It is clear that Hon’ble High Court of Kerala in Writ Appeal No.1250/2007 observed that it has not concluded the issue with regard to legality of the sale proceedings and that issue was left open to be decided by the Tribunal in the SA. Thus held, that Tribunal erred in not exercising its jurisdiction and passed order without considering the issues raised.

In paragraph 5 of the order, it was observed and held as follows:

In effect, Hon’ble High Court held that DRT disposed the SA on the wrong assumption that issues raised in the SARFAESI application had already been conclusively decided against the appellants in the judgment in WA No.1250/2007. It is factually incorrect. Thus set aside the order of the DRT passed in the TSA 10/2016 and relegated the matter for a fresh consideration.

After remand, borrowers filed IA No.179/2016 to decide on the maintainability of the SARFAESI Application. That application and TSA No.10/2016 were taken and disposed on the same date i.e., on 29.9.2018 by separate orders. While deciding IA 179/2016, Learned Presiding Officer observed as follows:

TSA No.10/2016 was also dismissed more or less on the same grounds and on the ground that measures initiated by the respondent bank under Section 13(4) are in accordance with law and that there is no legal infirmity or jurisdictional error in respect of the measures taken to recover the secured debt.

Against the order passed in SA No.66/2006, appellants filed OP (DRT) No.122/2018. Hon’ble High Court of Kerala, after recording the previous proceedings, observed that “appellants did not choose to challenge the sale by amendment and sought to bring in certain additional averments and ground in respect of earlier challenge to taking over possession and sale of the secured asset. Obvious reasons are that if appellants win the SA, then, subsequent sale would also fail. Other reason is that DRT passed an order on 3.4.2007 declaring that validity of the sale will be considered at the time of final disposal of the SA. It was observed in paragraph 30 that DRT earlier took a view that it was estopped from considering the merits of the contentions in the SA, because of the judgment in WA No.1250/2007 in Ex.P26 and Ex.P27. The findings are essentially to the effect that the SA itself has become infructuous on account of the sale happened”.

In Paragraph 32 of the order, it was observed that “there was an application IA 179/2016 before DRT raising the question of maintainability of the SA at the instance of the auction purchasers. DRT concluded in paragraph 26 of its order that amendments earlier allowed to the SARFAESI application were unnecessary and time barred and that it cannot be looked into it and proceeded to hold that SA itself has become infructous on account of subsequent sale. Appellants themselves conceded in WA No.1250/2007 that on the happening of the sale, SA has become infructuous.”

In paragraph 33, it was observed and held that, “DRT ought to have concluded upon the contentions of the parties on its legal merits, rather than merely on the question of maintainability of the SA. Many of the observations and holdings in Ex.P26 and Ex.P27 orders require further evaluation. But, it still does not guide to the forensic impressin that these orders are without jurisdiction or to be non est or void in low. Therefore, Ex.A26 and P27 ordes are to be tested properly and appellants should be advised to invoke alterative remedy available under the SARFAESI Act, to raise all factual and legal disputations and thus directed the appellants to approach the Appellate Tribunal within a period of two weeks to challenge the Ex.P26 and Ex.P27 orders”. Thus, these appeals are filed.

From the consideration of the materials produced and submissions made by Learned Counsel appearing for parties, this Tribunal finds the following violations in observing the mandatory requirements under the SARFAESI Act.

These are the violations of the mandatory provisions of SARFAESI Act and the Rules made thereunder and irregularities in the conduct of sale, confirmation of sale, receipt of balance sale consideration and issuance of sale certificate. Merely because there is no specific prayer to set aside the sale and sale certificate, these violations of the bank, in the light of the reasons stated above, cannot be ignored, especially when the prayers to set aside the tender notice can be allowed for the violations pointed out, when tender notice is set aside, sale and issuance of sale certificate have to be set aside as a consequential relief.

As seen from the decision of Hon’ble High Court of Kerala in OP(DRT) No.120/2016 and OP(DRT) 122/2018, learned Presiding Officer had disposed the SA only on technical ground, that is, on the ground that once sale is over, SARFAESI application filed challenging the tender notice had become infructuous and other technical grounds, without considering the issues raised with regard to violation in issuing tender notice, by giving 30 days time for paying balance sale consideration, plea regarding undervaluation of the property and excessive execution.

After raising all the pleas, inadvertently there was an omission to include the prayer to set aside the sale. This omission evidently was committed by the learned counsel, who prepared the SARFAESI application, amendment application and the amended Securitization Application. For the fault committed by the learned counsel for the appellants, appellants cannot be penalized.

Therefore, this Tribunal is of the view that the order of the Learned Presiding Officer, DRT-II, Ernakulam, dismissing TSA No.10/2016 (SA No.66/2006) and the order allowing IA No.179/2016 in TSA No.10/2016 on 29.8.2018, are liable to be set aside, for the reasons stated above.

In the result, RA(SA) 25/2020 is allowed by setting aside the dismissal order passed in TSA No.10/2016 (SA No.66/2006) and MA (SA) 10/2020 is allowed by setting aside the order allowing IA 179/2016, on the following terms. Thus, TSA No.10/2016 (SA No.66/2006) is allowed and IA No.179/2016 is dismissed.

Parties are directed to bear their own costs.

Pending IAs, if any, stand closed.