Both these appeals have been preferred under Section 18 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as “The SARFAESI Act”) against the order dated 11.2.2019 passed by the DRT, Lucknow, whereby the S.A. filed by the borrowers was allowed, hence are being decided by this common order.
2. The relevant facts of the matter are, that the Bank of India (appellant in Appeal No. R-16/2019) granted various credit facilities to the respondent No.1, to which the respondent No. 2 stood as guarantor. The loan was also secured by mortgage of immovable property belonging to the respondent No. 1-company and hypothecation of the plant and machinery. Since the borrower did not adhere to the repayment plan, hence the appellant-Bank classified the account as NPA and issued demand notice dated 27.6.2014 under Section 13(2) of the SARFAESI Act, 2002 demanding a sum of Rs. 11,52,52,809.57. The respondents-borrowers failed to pay the amount as demanded, hence the possession notice dated 18.9.2014 was issued under Section 13(4) of the SARFAESI Act, 2002.
3. The borrowers challenged the proceedings by filing the S.A. No. 453/2014 before the Tribunal below stating inter alia that their representation under Section 13(3-A) of the SARFAESI Act was not decided and possession of the secured assets was not taken in accordance with the provisions of law. Thereafter, the Bank issued sale notice dated 22.1.2017 for sale of the movable and immovable properties of the respondents.
4. It transpires that the borrowers preferred an interim application dated 25.2.2017 for setting aside the sale notice dated 22.1.2017 and restraining the Bank from selling the secured assets scheduled for 3.3.2017. The said application was allowed vide order dated 14.3.2017 and the appellant-Bank was restrained from auctioning the properties and directed to maintain the status quo till disposal of the S.A.
5. The appellant-Bank challenged the order dated 14.3.2017 passed by the Tribunal below by filing Appeal Sr. No. 90/2017 before this Tribunal, which was allowed vide order dated 21.5.2018 and the order dated 14.3.2017 passed by the Tribunal below was set aside with liberty to the Bank to take further necessary steps in accordance with law.
6. The respondents-borrowers filed Writ-C No. 31020 of 2018 before the Hon’ble High Court challenging the order dated 21.5.2018 passed by this Tribunal, which was disposed off vide order dated 13.9.2018 with direction to the Debt Recovery Tribunal to decide the securitization application expeditiously, preferably within a period of two months from the date of order.
7. In the meantime, several sale notices were issued, but the sale could not be materialized, therefore, the Bank issued fresh sale notice dated 5.8.2018 scheduling the auction of the immovable and movable properties for 14.9.2018 and the same were sold for Rs. 16,96,07,000/- and Rs. 24.07 lacs respectively. The sale certificates were issued on 4.10.2018 & 15.9.2018 and the sale deed was registered in favour of the auction-purchaser, who is appellant in Appeal Dy. No. 95/2019.
8. The respondents amended their securitization application for subsequent developments and the appellant-Bank filed objection to the amended portion of the S.A. The Tribunal below vide impugned order set aside the possession notice, sale notice and the sale certificate registered in favour of the auction-purchaser observing that the action of taking physical possession of the secured assets was not in consonance with the Rules 8(1) and (2) of the Security Interest (Enforcement) Rules, 2002. Being aggrieved by the said order, the Appeal No. R-16/2019 has been filed by the Bank and the Appeal Dy. No. 95/2019 by the auction-purchaser.
9. Learned Counsel for the appellant-Bank submitted that the possession notice dated 18.9.2014 was duly sent to the respondents-borrowers by registered post on 19.9.2014. The same was affixed on the premises and published in two newspapers, but the Tribunal below has set aside the proceedings stating that no prior notice was served before taking possession of the property. This finding is perverse, as no prior notice is required to be served in view of the judgment passed by the Hon’ble Supreme Court in Standard Chartered Bank v. V. Noble Kumar & Ors, III (2016) BC 405 (SC)=III (2016) DLT (CRL.) 148 (SC)=IV (2016) SLT 531=III (2016) CCR 64 (SC)=(2013) 9 SCC 620 and also held by this Tribunal in the judgment of Export-Import Bank of India & Ors. v. Sevakram Asrani and Others, II (2019) BC 53 (DRAT), Appeal No. 130 of 2017, decided on 14.9.2018. All the documents were placed before the Tribunal below, but ignoring these documents, the findings were recorded against the Bank, hence the order impugned is not sustainable.
10. Learned Counsel for the auction-purchaser supported the arguments as advanced on behalf of the Bank and further added that there was no irregularity in the proceedings of the Bank and the auction-purchaser has bonafidely purchased the property, hence, its interest be protected in view of the judgment passed by the Hon’ble Supreme Court in Sadashiv Prasad Singh v. Harendra Singh & Others, I (2014) BC 654 (SC)=II (2014) SLT 5=(2015) 5 SCC 574. It was also contended that no prior notice was required as laid down by the Hon’ble Supreme Court and this Appellate Tribunal in the judgments referred on behalf of the Bank.
11. On the contrary, the learned Counsel for the respondents-borrowers submitted that before taking possession of the property, the Bank is required to serve the notice, as laid down by the Hon’ble Karnataka High Court in K.R. Krishnegowda and Another v. Chief Manager/Authorized Officer, Kotak Mahindra Bank, I (2013) BC 445 (DB)=MANU/KA/0698/2012, which was rightly relied upon by the Tribunal below. It was further contended that both the modes of delivery of possession notice, its affixation and publication in the newspaper are required to be adopted under Rules 8(1) and (2) of the Security Interest (Enforcement) Rules, 2002 (in short “The Rules, 2002”), whereas in the present matter, the possession notice was not delivered, therefore, the sale of the property was bad. To substantiate this argument, the learned Counsel referred the judgment passed by the Hon’ble Madras High Court in Bharath Post Graduate College through its Authorized Signatory, SPE Trust v. India Bulls Housing Finance Limited rep. by its Manager and Others, 2018 (4) LW 512 (Mad.). It was also argued that even the Bank has not sent the copy of the possession notice with its letter dated 18.9.2014 and only copy of Panchnama and inventory of movable assets were sent, therefore, mere sending of information by post cannot be treated as proper delivery of the possession notice.
12. I have considered the rival contentions of the learned Counsels for the parties and perused the record.
13. The S.A. applicants-borrowers raised three issues before the Tribunal below; the first for non-compliance of Section 13(3-A) of the SARFAESI Act, second for non-compliance of Rules 8(1) and (2) of the Rules, 2002 and third for non- compliance of Rules 8(5) and (6) of Rules, 2002. The Tribunal below observed that the compliance of Section 13(3-A) of the SARFAESI Act and Rules 8(5) and (6) of Rules, 2002 has been made by the Bank and no infirmity was recorded in this regard. The borrowers have not challenged this finding, hence it has become final.
14. With regard to non-compliance of Rules 8(1) and (2) of the Rules, 2002, the Tribunal below has observed that the communication dated 18.9.2014 was sent through registered post on 19.9.2014, but the same was sent after taking possession of the secured assets and no prior notice was given to the S.A. applicants. Thus, in its opinion, the physical possession of the secured assets was not taken in consonance with the procedure, but the finding recorded by the Tribunal below appears to be perverse, as the Tribunal has not appreciated the law and facts in right perspective.
15. The SARFAESI Act and the rules made thereunder nowhere prescribe that a prior notice is required to be served by the Bank before taking possession of the secured assets. The Hon’ble Karnataka High Court in the judgment of K.R. Krishnegowda v. Chief Manager/Authorized Officer, Kotak Mahindra Bank (supra) decided the matter in other context observing that the party be apprised of the date, on which the possession would be taken and that was with regard to the application filed under Section 14 of the SARFAESI Act before the District Magistrate. The said judgment was passed on 27.3.2012. However, thereafter, the Hon’ble Supreme Court has categorically held in the judgment of Standard Chartered Bank v. V. Noble Kumar (supra), decided on 22.8.2013 that the secured creditor may take possession, if no resistance is caused and if there is any resistance from the borrower, then the secured creditor may take recourse to Section 14 of the SARFAESI Act or may directly approach before the District Magistrate under Section 14 of the SARFAESI Act. It has been categorically held at para 37 of the judgment that any of the three methods for taking possession may be adopted. Thus, there is no requirement of prior notice after this judgment of the Hon’ble Supreme Court. Following the principle of the said judgment, this Tribunal has held in Export-Import Bank of India v. Sevakram Asrani (supra) that no such prior notice is required and the judgment of the Hon’ble Karnataka High Court was distinguished on the basis of the judgment of the Hon’ble Supreme Court in V. Noble Kumar case. The Tribunal below has not taken into consideration the judgment of the Hon’ble Supreme Court as well as the judgment of this Tribunal, which are squarely applicable on the issue of same controversy, therefore, the finding that the possession was taken without prior notice, is not sustainable.
16. The possession of the secured asset was taken on 18.9.2014. The Bank has placed on record the communication dated 18.9.2014, which was sent through registered post on 19.9.2014 to the borrowers/guarantors. The borrowers have not denied the receipt of letter dated 18.9.2014. The appellant-Bank has specifically mentioned at para 5.14 of the memo of appeal that the possession notice was delivered to the borrowers, affixed on the outer door and all the documents were filed before the Tribunal below. This averment was not rebutted by the borrowers by filing any counter objection. Thus, it is proved that the information with regard to possession of the secured asset was sent by the Bank vide its letter dated 18.9.2014 through registered post on 19.9.2014, which is evident from the documents placed at page Nos. 54 to 57 of the memo of appeal. Since the borrowers were not present at the time of physical possession, hence the delivery on the spot was not possible, therefore, it was immediately sent on the next day by registered post, so it cannot be said that there was any delay in sending or delivering the possession notice.
17. The possession notice has been affixed on conspicuous part of the premises, as it reveals from the documents placed at page Nos. 69 to 72 of the memo of appeal. The same was published in two newspapers, copies of which are placed at page Nos. 52 and 53. Thus, the Bank has strictly complied with the procedures laid down under the Rules 8(1) and (2) of the Rules, 2002.
18. I respectfully agree with the principle laid down by the Hon’ble Madras High Court in Bharath Post Graduate College v. India Bulls Housing Finance Limited (supra) that the possession notice be served by two modes, one by delivering and another by affixation and no sale can be held before delivering of possession notice. In that case, the possession notice dated 16.5.2017 was received by the borrowers on 22.5.2017, whereas the Bank had issued the sale notice on 19.5.2017 i.e. before service of possession notice on the borrowers. In that case, the service of possession notice was not found proper. However, in the instant case, the Bank has immediately sent the possession notice and the sale notice was issued after service of possession notice. Thus, both the modes have been adopted by the Bank.
19. The argument that the copy of the possession notice was not sent with the communication dated 18.9.2014, is also devoid of force. Firstly, it was not pleaded either before th
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e Tribunal below or before this Tribunal that the copy of the possession notice was not received by the borrowers along with the letter dated 18.9.2014. Even no such counter objection was filed stating this fact before the Tribunal. Thus, the contention of the Bank stating that the possession notice was delivered to the borrowers remains unrebutted. So now the borrowers cannot take the benefit of the factum that “sending of copy of panchnama and inventory of movable assets” was mentioned in the letter dated 18.9.2014. Secondly, the Bank has categorically mentioned in the communication dated 18.9.2014 that the physical possession of the mortgaged property has been taken, narrating the fact of issuance of demand notice on 27.6.2014 demanding a sum of Rs. 11,52,52,809.57. Thus, even assuming that the separate copy of the possession notice was not sent with communication dated 18.9.2014 has no material bearing as the communication itself discloses the fact of having taken the physical possession. 20. In view of the aforesaid, the order impugned passed by the Tribunal below is not sustainable and liable to be set aside. 21. Accordingly, both the appeals are allowed and the impugned order dated 11.2.2019 is set aside. No order as to costs. 22. A copy of this judgment be supplied to the parties as well as to the DRT concerned. Appeals allowed.