1. The applicant filed Securitisation Application under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 challenging the sale notice dated 26.04.2019 fixing the auction on 30.05.2019 under SARFAESI Act and without following the rules, provisions, regulations and procedures as prescribed under SARFAESI Act.
2. The case in brief is that applicant has approached respondent bank for sanction of cash credit/bank guarantee of Rs. 2.00 crores vide sanction letter dated 07.03.2015 i.e., cash credit limit of Rs. 1.00 crore and bank guarantee for Rs. 1.00 crore in favour of National Small Industries Corporation. The applicant availed bank guarantee on 3.09.2015 and made fixed deposit of Rs. 25.00 lakhs. It is submitted that the respondent bank has taken sufficient security worth Rs. 3,50,00,000/- from applicant company, but respondent has not come forward with applicant company for conversion of bank guarantee into cash credit limit. Thereafter the applicant company approached the respondent bank for additional financial assistance by offering additional securities, but respondent bank has not considered the request of applicant company. Instead of considering the request the respondent bank has stopped the day-to-day operations in the account of applicant company. It is submitted that respondent bank has issued notices to Smt. Shaik Shahnaz Begum, who resigned from the directorship of applicant company and in her place one director Sri Radhakrishna duggirala was taken on board of applicant company w.e.f. 29.12.2017. Inspite of non-cooperation from respondent bank, the applicant company was prompt in payment of loan instalments initially for about three years i.e., upto 31.3.2018. The respondent bank declared the loan account as NPA and issued demand notice dated 01.10.2018 under section 13(2) recalling the entire loan amount together with interest accrued to Rs. 1,79,35,657.60ps. The applicant company approached M/s. Resilent Projects and entered into a memorandum of understanding for arranging loan to close the loan account and according to the said understanding, M/s. Resilent projects agreed to fund Rs. 20.00 lakhs to applicant company and thereafter the applicant company informed respondent bank that they were ready to pay Rs. 20.00 lakhs and respondent bank informed to make the payment in "No lien account". Thereafter the applicant company addressed letter dated 10.12.2018 requesting to release one out of two secured properties and offered to pay Rs. 60,00,000/- to respondent bank through Resilent project but the respondent did not consider the request of applicant company. It is submitted that applicant has an intention to close the account and settle the matter amicably but respondent bank went ahead for taking possession of secured assets in pursuance of possession notice issued and published in newspapers dated 13.12.2018. Thereafter sale notice dated 26.4.2019 was issued fixing the auction on 30.05.2019 without deduction of amount kept in No lien account.
The applicant relied upon the following judgments:
a) Judgment of Hon'ble Supreme court in Mathew Varghese Vs. M. Amritha Kumar : (2014) 5 SCC 610.
b) Mardia Chemicals case reported in : 2004 (4) SCC 311 and also in 2014 (2) ALD page 350 (DB) Vs. Union of India.
c) Hon'ble Supreme Court judgment reported in : 2014 (6) SCC page 1 Harsh Govardhan's case.
It is contended that the respondent bank has not issued notice under 8(6) and not followed 8(7) and 9(1) which is mandatory to the notice as per the Act. The respondent bank issued sale notice without date which is against law and which don't show the 30 days gap as per law. The respondent failed to give opportunity to redeem his property for payment of amount before date of publication as per the Act. It is submitted that the sale notice was not affixed on schedule property as it is against the law. As per 8(1) of SARFAESI rules, the possession notice need to be affixed on the outer door of schedule property. The possession notice issued by respondent is also not maintainable in view of the fact that no notice has been issued to applicant before alleged compliance of Section 2(1)(o) of SARFAESI act. The applicant further states that the charges said to have been created by applicant company are also barred and hence void, having been not registered under section 125 and 135 of Companies Act. The recall notice issued by respondent is against the RBI circular issued in the year 1986-87. The respondent has published a notice to take symbolic possession of property which is otherwise not according to rule 8(1) of SARFAESI Rules. It is submitted that each and every allegation and purported claims set out in the notice are baseless, frivolous, vexatious, misconceived and arbitrary. Hence prayed to declare the action initiated by respondent bank as illegal, arbitrary, null and void.
3. Reply statement filed by respondent bank denying all the averments made by applicant. It is submitted that the applicant was made clear that the bank guarantee cannot be converted into cash credit facility. It is true that the beneficiary invoked the bank guarantee and the same was honoured. The availability of security cannot be a sole ground for grant of limits or conversion of limits. It is vehemently denied that there was any negative attitude on behalf of respondent as alleged. Admittedly, the applicant was given a long rope for conducting the account as per terms of sanction. Since the applicant failed to adhere to the terms of sanction, the day to day operations in account were stopped. It is submitted that respondent has not released Mrs. Shaik Shahanaz Begum from the liability for the Claim. Unilateral resignations etc are not binding on the respondent. It is absolutely false to allege that the applicant was prompt in repayment of dues. It is true that the demand notice dated 01.10.2018 was issued recalling the outstanding dues. It is also submitted that the respondent is not aware about the steps taken by applicant to obtain alleged loan from M/s. Resilent projects etc. Admittedly no permission has been obtained from respondent for entering into alleged memorandum of understanding with M/s. Resilent Projects, it is vehemently denied that there was any consent from respondent for alleged transaction with Resilent Projects. There is not even an iota of truth in the statements made. It was made clear to applicant that the securities cannot be released piecemeal and only on the clearance of entire dues the documents would be released and not otherwise. However, it is reiterated that only after following the RBI advices, the account has been classified as NPA. It is true that the applicant had been promising to dear the entire outstanding dues but has been dragging the matter. It is contended that the applicant is well aware that the steps under SARFAESI Act are all time bound and same cannot be delayed. It is true that all statutory notice were duly served on applicant. All payments made by applicant are given deduction and a sum of Rs. 1,61,99,587/- as on 31.5.2019 along with miscellaneous expenses is outstanding. It is equally true that after classification of account as NPA, further steps under SARFAESI act have been taken up. It is submitted that Rule 8(6) notice is duly served on applicant and even after expiry of stipulated Period of 30 days, the mortgage has not been redeemed. The Judgment in the matter of Mathew Varghese Vs. Amritha kumar do not apply to the facts of present case. The 30 days gap is maintained for bringing the property to sale. It is absolutely false to allege that the 30 days sale notice does not have a date. It is vehemently denied that the applicant is not given any opportunity for redeeming the mortgage. It is vehemently denied that the secured asset is not in possession of applicant and affixture of auction notice. All the steps taken by authorised officer are in consonance with the scheme of SARFAESI Act. It is vehemently denied that there is any violation of public policy or Section 23 of contract Act as alleged. All issues raised by applicant in reply notice under section 13(3A) of the Act is duly replied and the same is sufficient compliance of provisions of SARFAESI Act. It is reiterated that the respondent followed all legal steps available to it under law for recovering the dues. The applicant cannot insist for grant of renewal/enhancements contrary the bank's guidelines. It is submitted that the sale notice dated 16.4.2019 was duly served on applicant and its guarantors. The applicant failed to redeem the mortgage within 30 days period, the respondent issued E-auction notice dated 26.4.2019 and the same was affixed at the side and published in "Times of India and Eenadu" on 27.4.2019. The valuation report from panel valuer was obtained on 24.10.2018. All payments made by applicant were given due deduction. It is submitted that this Tribunal directed the applicant to deposit Rs. 15 lakhs within one week from date of order and another Rs. 15.00 lakhs in another week thereafter. However, the applicant did not comply the conditional order. There were no bidders for auction and respondent intends to proceed further auction under SARFAESI act. It is finally submitted that the respondent followed all steps under SARFAESI act and no deviation whatsoever. Hence prayed to dismiss the SA.
4. The points for consideration are as follows:
(i) whether the sale notice dated 26.4.2019 under challenge is sustainable in law?
(ii) whether the respondent bank has followed the procedure as contemplated under law?
(iii) whether the applicant is entitled to the relief sought for in the present SARFAESI application?
Heard both the parties at length and perused the material documents filed by them.
5. It is the contention of the applicants that the respondent bank has failed to follow the guidelines of RBI in classifying the account as NPA, the respondent bank has failed to affix the possession notice on secured asset, the possession notice is not served on the borrowers.
6. Per contra, the respondent filed its counter and filed set of documents denying each and every averment of the applicant herein. The respondent bank contends that the applicants have raised objection vide letter dated 27.11.2018 to the notice sent under section 13(2) of the Act. The respondent bank replied the same vide letter dated 04.12.2018, hence complied with Section 13(3A) of SARFAESI Act. As there was no repayment from the applicants to the demand notice issued under section 13(2) of the Act, the respondent bank was constrained to issue the possession notice under section 13(4) of the Act. Since no repayment is forthcoming, the respondent bank proceeded for the auction of the secured assets. The respondent bank further submits that the grounds raised by the applicant are not tenable and the respondent bank has strictly complied with the procedure contemplated under the SARFAESI Act and rules made thereunder. Therefore, praying that the SA is liable to be dismissed.
7. Points (i) & (ii):
The respondent bank has filed documents viz., demand notice dated 01.10.2018 along with proof of service on the applicants, possession notice dated 10.12.2018, photographs evidencing service and affixture of the possession notice, publication in "Business standard and Mana Telangana" both dated 13.12.2018. The respondent bank filed 30 days sale notice dated 16.4.2019 and proof of service of the same is filed. Thus the respondent bank has demonstrated that it had followed the procedures contemplated under the provisions of the SARFAESI Act and the rules made thereunder.
The respondent bank issued sale notice dated 26.4.2019 and filed proof of publication and affixture of the same. In the foregoing circumstances, it is therefore held th
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at the actions of the respondent bank in issuing the sale notice dated 26.4.2019 is valid in law and the respondent bank has complied with the provisions of the SARFAESI Act and the Rules made thereunder as demonstrated through their documents referred above and which have not been objected to or contravened by the applicant. The respondent bank submitted that the contemplated auction on 30.05.2019 did not fructify for want of bidders. 8. Point No. (iii): Since the respondent bank has followed the procedure as contemplated under the Act and the rules made thereunder in issuing the impugned possession notice dated 10.12.2018 and sale notice dated 26.4.2019, this SARFAESI application is devoid of any merits and the applicant failed to establish any infirmity in the procedure adopted by the respondent bank as secured creditor. Since the auction on 30.05.2019 was cancelled, the cause of action no more survives and the SA is liable to be dismissed as infructuous. 9. Accordingly the SA is dismissed. The respondent bank is at liberty to proceed further in accordance to law. 10. Communicate a copy of this order to the parties concerned. (Dictated to the P.A., transcribed by her, corrected, signed and pronounced by me in the open court on this the 29th day of Jan, 2020)