1. The SA is laid seeking to set aside Annexure - A1 demand notice dated 12.02.2015, Annexure - A2 notice of dispossession dated 09.11.2015 issued by Advocate Commissioner and Annexure - A3 petition under S. 14 of SARFAESI Act filed before the Ld. CJM Court, Ernakulam in CMP No. 3363/2015.
2.1 Mr. V.K. Peer Mohammed Khan Ld. counsel for the applicant would pointedly argue that the entire SARFAESIA proceedings stood vitiated going by the striking fact that Annexure - A1 demand notice dated 12.02.2015 issued by the defendant is ex-facie illegal, defective and discrepant. Ld. counsel took this Tribunal through internal page Nos. 2 & 3 of Annexure - A1 demand notice whereunder the balance outstanding as on 11.02.2015 had been shown in CCOL, 1st FSL and 2nd FSL loan accounts to be respectively Rs. 30 lakhs, Rs. 2,79,372/- and Rs. 31,57,290/- and the demand for said amount in the said notice is seen made as hereunder:
1. A sum of Rs. 30,00,000/- (Rupees Thirty lakhs only) with further interest @ 13% per annum with monthly rests and penal interest @ 2% per annum from 01.02.2015 with regard to OD limit.
2. A sum of Rs. 2,79,372/- (Rupees Two lakhs seventy six thousand three hundred seventy two only) with further interest @ 13% per annum with monthly rests and penal interest @ 2% per annum from 28.01.2015.
3. A sum of Rs. 31,57,290/- (Rupees Thirty two lakhs one thousand seven hundred and ninety eight only) with further interest @ 13.00% per annum with monthly rests and penal interest @ 2% per annum from 28.01.2015.
2.2 The Ld. counsel for the applicant thereupon took this Tribunal through para 5 of Annexure - A3 application filed under Sec. 14 of SARFAESI Act and pointedly argued that the defendant had committed an illegality therein in having claimed an excessive interest @ 13.95% per annum towards the FSL account as against the interest @ 13% per annum otherwise demanded in Annexure-A1 demand notice.
2.3 It is the definitive case and contention of the applicants that the securitisation proceedings of the defendant bank is per se illegal going by the striking fact that an incorrect amount is claimed as due vide Annexure - A1 demand notice as also in Annexure-A3 petition filed under S. 14 of the Act. It was emphatically argued that as the Annexure-A1 demand notice sets out the balance as on 11.02.2015 interest should be held to have been calculated upto then and wherefore it is not open for the defendant to claim the alleged outstanding amount as if further interest is leviable on CCOL amount of Rs. 30 lakhs from 01.02.2015 and to both of the FSL accounts from 28.01.2015. It was further submitted that the Annexures A4 to A6 statement of accounts pertaining to CCOL and two FSL accounts does not reflect the outstanding amounts as set out in Annexure-A1 demand notice whereby the subsequent SARFAESIA measures and actions proceeded by the defendant bank under S. 13(4) of the Act is rendered invalid and ineffectual. For the aforestated solitary reason, the SA is sought to be allowed by setting aside Annexures - A1 to A3.
3.1 Mr. K.S. Dilip Ld. counsel for the defendant bank would submit that the cash credit overdraft loan of Rs. 30 lakhs, FSL of Rs. 6 lakhs and another FSL of Rs. 71 lakhs concededly availed by the applicants against the security of the SA mentioned property came to be classified as NPA for the reason of non-repayment of the amounts due to the bank as also for violation of the terms of sanction, non-availability of stocks etc., followed by issuance of Annexure-A1 demand notice dated 12.02.2015. Ld. counsel succinctly pointed out that what is now canvassed before the Tribunal as an illegality in so far as S. 14 petition is concerned is the mentioning of the rate of interest to be @ 13.95% per annum with monthly rest and penal interest @ 2% per annum from 28.01.2015 which is only a 'typographical error' that has crept in as the preceding lines in para 5 of the said Annexure would show that the rate of interest set out for all the three facilities were @ 13% per annum with monthly rest and penal interest @ 2% per annum.
3.2 The Ld. counsel for the defendant bank would as well submit that going by the loaning/security documents that are produced herein as Annexures B1, B2, B4 to B23 it would be all the more clear that the rate of interest claimed vide Annexure - A1 demand notice and Annexure - A3 S. 14 petition is only a lesser rate of interest being 13% per annum besides penal interest at 2% as against the original contractual rate of interest which was @ 15.65% per annum besides penal interest @ 2%. He would submit that the outstanding amounts claimed in the demand notice are correct ones going by Annexures - A4, A5 & A6 statement of accounts and merely for the reason of the aforestated inadvertent mistake which has crept in S. 14 petition, the applicants cannot be heard to contend the securitisation proceedings to be in any respects illegal. It was submitted that as no procedural irregularities or legal infirmities could be pointed out by the applicants in any of the measures or actions proceeded with by the defendant bank in respect of the 'secured asset', the SA is only to be dismissed with costs.
4.1 It is not in dispute that the 1st applicant firm had availed CCOL limit of Rs. 30 lakhs, FSL of Rs. 6 lakhs and another FSL of Rs. 71 lakhs from the defendant bank against the security of properties set out in Annexure-A1 demand notice dated 12.02.2015 (which is duly served on all the borrowers including the applicants as is evincible from Annexure-B3 postal acknowledgment cards dated 20.02.2015 returned to the defendant bank). Annexures-B4 to B8 loaning documents dated 28.03.2008 produced by the defendant bank is evidential of the 1st applicant firm's availment of CCOL limit of Rs. 10 lakhs for a period of one year and two FSLs of Rs. 6 lakhs and Rs. 71 lakhs which are respectively repayable in 84 months after a holiday period of 6 months @ Rs. 13,250/- and Rs. 1,56,750/- every month. The interest then agreed upon in respect of CCOL limit is 15% per annum with monthly rests and towards the two FSLs 15.5% per annum with monthly rests. Annexure-B9 is the letter confirming deposit of title deeds dated 29.03.2008 executed by the 1st applicant firm in respect of schedule 'B' item No. 2 property set out in Annexure-A1 demand notice evidencing creation of security interest in respect of the said property. Annexures-B10 to B16 are the loaning documents dated 26.11.2009 in respect of the renewed CCOL limit of Rs. 10 lakhs repayable with interest @ 16% per annum with monthly rest and the existing FSL liabilities. Annexure-B17 is the letter confirming redeposit of title deeds dated 27.11.2009 as continuing security for overall credit facilities of Rs. 87 lakhs availed and to be availed by 1st applicant firm. Annexure-B18 sanction letter dated 05.04.2012 is evidential of the defendant bank's accommodation of the enhanced CCOL limit of Rs. 30 lakhs to the 1st applicant firm repayable with interest @ 15.65% per annum with monthly rests, besides the existing two FSL liabilities. Annexures-B19 to B26 are its loaning/security documents dated 05.04.2012 which are inclusive of the guarantee agreement and acknowledgments of debt. Annexures-B27 to B29, B33 to B35 are the sanction/renewal documents as also AODs for CCOL limit of Rs. 30 lakhs and the existing FSL liabilities. Annexures-B31 & B32 are the letters dated 22.01.2013 executed by the mortgagors in confirmation of their redeposit of title deeds as continuing security. Annexures - B18 and B-27 sanction letters as also the credit facility agreements stated supra provide for charging of penal interest @ 2% per annum in case of default in repayment of the dues.
4.2 Going by the loaning documents relating to two FSLs of Rs. 6 lakhs and Rs. 71 lakhs, its loan repayment period being 84 months (i.e. 7 years) after a holiday period of six months from 28.03.2008, the tenure of its repayment had expired by October, 2015 prior to the institution of the present SA. In as much as Annexure - A1 demand notice dated 12.02.2015 would set out as the then outstanding liability a sum of Rs. 2,79,372 and Rs. 31,57,290/- towards the FSLs of Rs. 6 lakhs and Rs. 71 lakhs respectively, there can be no dispute or quarrel as regards the said loan accounts turning out to be a 'non performing asset' in terms of clause 2.1.2(i) of the RBI's Master Circular prescribing Prudential Norms of Income Recognition, Assets classification and Provisions pertaining to advances for all Commercial Banks which define a 'NPA' to be a loan or advance where interest and/or instalment of principal remain overdue for a period of more than 90 days in respect of a term loan.
4.3 As the Master Circular of RBI axiomatically provides for 'borrower-wise' classification of assets and not 'facility - wise', on the said two FSLs turning out to be NPAs, the CCOL limit of Rs. 30 lakhs which is otherwise found to have been brought well within the sanctioned limit also turns out to be a NPA. We could find the said legal position reaffirmed in the judgment of Hon'ble DRAT, Delhi rendered in the case of Kuaan International v. Asset Reconstruction Company (India) Ltd which reads as follows:
"9. I have considered the submissions of the parties Counsel and perused the record. A perusal of the order impugned would show that challenge to the classification of the account as NPA as made by the appellant before this Tribunal was not so raised before the Tribunal below, which has rightly observed that once one account is classified as NPA, the other accounts can also be classified as such. The contention of Ms. Rungta appears tenable that the appellant has failed to show any illegality in classification of the term loan account of the appellant as NPA. Since one account of the borrower/appellant has rightly been classified as NPA, the question whether or not the Cash Credit accounts remained out of order for more than 180 days loses its importance."
(emphasis is mine)
4.4 Merely for the reason of the 1st applicant firm's remittance of certain amounts towards one FSL account ending with the Nos. 831 consequent upon the issuance of Annexure - A1 demand notice dated 12.02.2015, the loan accounts cannot be held to have been regularised or standardised more-so when the applicants have no case or contention as to their remittance of the entire principal amount as also the interest for up-gradation of such accounts. Annexures - A5 and A6 statement of accounts both dated 17.11.2015 relating to the two FLS accounts ending with Nos. 830 and 831 would show the debit balance amount to be Rs. 3,12,778/- and Rs. 30,99,577/- respectively in respect of such accounts whose repayment period of seven years had since expired. Wherefore the applicants' pleading and submissions as to the defendant bank permitting operation of such accounts as regular accounts are wholly unacceptable both on facts and in law.
4.5 In the above factual background, the short question which remains to be considered and determined by the Tribunal is as to whether the demand made in Annexure - A1 demand notice dated 12.02.2015 issued under S. 13(2) for repayment of the 'secured debt' set out therein and the secured debt together with interest payable thereon stated to be due by the defendant in Annexure - A3 petition filed by him in terms of S. 14 of SARFAESI Act are incorrect and illegal vitiating the entire securitisation proceedings?
4.6 Taking a close look at Annexure - A1 demand notice dated 12.02.2015 and Annexures - A4 to A6 statement of accounts relating to CCOL account and two FSL accounts ending with the Nos. 830 and 831 it is discernible that the defendant had vide Annexure - A1 demand notice required the applicants to pay a sum of Rs. 30,00,000/- (Rupees Thirty lakhs Only) with further interest from 01.02.2015 towards CCOL account, another sum of Rs. 2,79,372/- (Rupees Two lakhs Seventy Six Thousand Three Hundred and Seventy Two Only) with further interest towards FSL account ending with No. 830 and another sum of Rs. 31,57,290/- (Rupees Thirty Two lakhs One thousand Seven Hundred Ninety Eight Only) with further interest towards FSL account ending with No. 831. On a conspectus of Annexures - A4 to A6 statement of accounts relating to CCOL account and two FSL accounts ending with the Nos. 830 and 831 it becomes clear that the debit balance reflected in Cash Credit Account as on 10.02.2015 - is Rs. 30 lakhs besides the interest payable thereon from 01.02.2015, the debit balance reflected in FSL account ending with the No. 830 as on 28.01.2015 is Rs. 2,79,509/- besides the interest payable thereon from 28.01.2015 and the debit balance reflected in FSL account ending with the No. 831 as on 10.02.2015 is Rs. 31,57,290/- besides the interest payable thereon from 28.01.2015. It is not to be held that the outstanding amount stated to be certain sum of monies as on 11.02.2015 - a day prior to issuance of Annexure-A1 demand notice dated 12.02.2015 is inclusive of interest charged upto that date when it is inferable from the successive paras therein as to the interest being payable from 01.02.2015 in the case of OD limit and from 28.01.2015 in the case of two FSL liabilities.
4.7 The Tribunal did not fail to notice that Annexure - A1 demand notice and Annexure - A3 - S. 14 petition would set out Rs. 2,79,372/- as the amount due towards the FSL account ending with No. 830 as against Rs. 2,79,509/- found to be the amount actually due as on 28.01.2015 in Annexure - A5 statement of account. Noticeably Annexure - A1 demand notice and Annexure - A3 - S. 14 petition would set out Rs. 31,57,290/- as the amount due towards the FSL account ending with No. 831 which is found to be in consonance with Annexure - A6 statement of account divulging the self same amount to be the debit balance as on 10.02.2015 besides interest payable from 28.01.2015. Notwithstanding the fact as to there being some typographical mistakes here and there in respect of the FSL account in Annexure - A1 demand notice, the aggregate sum of Rs. 64,36,799/- (Rupees Sixty Four lakhs Thirty Six Thousand Seven Hundred Ninety Nine Only) demanded as 'secured debt' as on 11.02.2015 is the sum total of the debit balance amounts reflected in Annexures - A4 to A6 statement of accounts relating to all three loans. In fine, the aggregate amount demanded vide Annexure - A1 demand notice is in consonance and conformity with the actual debit balances reflected in Annexure - A4 to Annexure - A6 account statements. That being the case, the applicants cannot be heard to contend to have suffered any prejudice on they being served with Annexure - A1 demand notice calling for repayment of Rs. 64,36,799/- as on 11.02.2015 with further interest and penal interest as applicable from 01.02.2015 with regard to CCOL account and from 28.01.2015 with regard to two FSL accounts.
4.8 Whether the defendant had claimed an arbitrary rate of interest @ 13.95% per annum in Annexure - A3 - S. 14 petition as against the interest @ 13% per annum claimed in Annexure - A1 demand notice to be the future interest payable from 01.02.2015 and 28.01.2015 in respect of CCOL and FSL loans respectively received the Tribunal's further consideration. The averments made by the defendant herein in para 5 of Annexure - A3 - S. 14 petition filed before Chief Judicial Magistrate Court, Ernakulam in C.M.P. 3663/2015 is extracted out below:
"5. In respect of the CCOL - loan facility availed by the respondents, the respondents are jointly and severally liable to pay a sum of Rs. 30,00,000/- with further interest @ 13% per annum with monthly rests and penal interest @ 2% per annum from 01.02.2015. In respect of the FSL - loan facility availed by the respondents, the respondents are jointly and severally liable to pay a sum of Rs. 2,79,372/- with further interest @ 13% per annum with monthly rests and penal interest @ 2% per annum from 28.01.2015. In respect of the FSL - loan facility availed by the respondents, the respondents are jointly and severally liable to pay a sum of Rs. 31,57,290/- with further interest @ 13% per annum with monthly rests and penal interest @ 2% per annum from 01.02.2015. with regard to as on 31.12.2014 at 13.95% per annum with monthly rests and penal interest at 2% per annum from 28.01.2015."
On a cursory reading of the above, the Tribunal arrives at an inescapable conclusion as to the highlighted portion hereinabove appearing to be a misprint or typo on account of the mischief of 'cut and paste' that had occurred while typing out the above averments in computer. The lines preceding the highlighted portion as also the extracted out portion ending with the date 28.01.2015 alone appears to be the proper averments co-relating to the claim already made in Annexure - A1 demand notice dated 12.02.2015 in respect of which a mention is found made in the immediate successive lines of the very same para in Annexure - A3 petition.
4.9 As rightly pointed out by the Ld. counsel for the defendant, the defendant had vide Annexure - A1 demand notice and Annexure - A3 petition claimed further interest only at 13% per annum with monthly rests besides penal interest at 2% per annum in respect of all the three loans as against the original contractual rate of interest being 15%, 15.5%, 16% and 15.65% per annum besides the penal interest at 2% per annum as otherwise borne out in the loaning/security documents discussed supra. Wherefore the contention now made in vain by the applicants as regards the defendant's claiming of an excessive interest @ 13.95% per annum besides penal interest @ 2% per annum vide Annexure - A3 petition is only to be negatived.
4.10 In the present case the applicants had not sent any reply or objection in terms of S. 13(3A) of the Act with regard to the defendant's claiming of an incorrect amount in Annexure-A1 demand notice. It only leaves an indelible impression on the Tribunal as to they suffering no prejudice due to the reason of some inadvertent mistake that has crept in the said notice as regards a FSL liability. The Tribunal wherefore is of the considered view that the securitisation proceedings otherwise lawfully proceeded with by the defendant cannot be set at naught or brushed aside lightly merely for the reason of certain typographical errors that is noticed in Annexure - A1 demand notice and Annexure - A3 - S. 14 petition which palpably appears to be negligible and insignificant in view of the indubitable fact that the aggregate sum of money demanded in Annexure - A1 as also Annexure - A3 petition is the sum total of the self same amounts reflected to be the debit balances in Annexures - A4 to A6 statement of accounts.
4.11 The golden rule of interpretation would warrant giving a purposive interpretation to the legislative intendment of an enactment in a manner furthering its avowed objects rather than seeking to stultify an otherwise lawful proceeding on hyper technical, narrow grounds. In holding such a view, the Tribunal stands fortified by the following legal pronouncements:
(a) The Division Bench of the Hon'ble High Court of Uttaranchal in the case titled Pooran Lal Arya and Others vs. State of Uttaranchal and Others reported in : III (2007) BC 285 held as follows:
"4. Learned Counsel for the petitioners submitted that in view of the defect in Annexure 4 notice dated April 18, 2004, the entire proceedings were vitiated and therefore the respondents were not entitled to proceed against the petitioners on the basis of the said notice. The defect pointed out by learned Counsel for the petitioners is that even though Section 13(2) of the above mentioned Act requires
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that the borrower should be given 60 days' time to discharge, in full, his liabilities to the secured creditor, in Annexure 4 notice only a period of a fortnight was given to the borrower. 7. Hence notwithstanding the technical error in Annexure 4 notice requiring the petitioners to clear off the dues within a fortnight from the date of issue of the notice, there was substantial compliance with the statutory provision and the petitioners actually got more than the time required to be given under Section 13(2) and no injustice was done to the petitioners. (Emphasis is mine) Therefore, it is not proper to invoke the jurisdiction of this Court under Article 226 of the Constitution of India." (b) The Division Bench of the Hon'ble High Court of Uttaranchal in the case titled Morbet Health Care (P) Ltd. v. Punjab National Bank reported in : 2016(2) DRTC 316 at page 321 held as follows: "12. Much emphasis has been laid by learned counsel for the petitioner on the fact that the date of NPA is different in different papers. In the considered opinion of this Court, the said argument has hardly any legs to stand, inasmuch as declaration by the bank that the petitioner has become NPA is material and not the date, even if there is slight discrepancy in the same." (c) The Division Bench of Hon'ble High Court of Madras in the case titled Kavitha Agencies v. Assistant General Manager, State Bank of Mysore, reported in CDJ 2010 MHC 5250 held as follows: "9. .............. the explanation offered by the bank that by mistake, in the reply to the objection sent by the petitioner, the date was wrongly mentioned, which is plausible. ........... Therefore merely because the date is not properly mentioned in the reply dated 15.03.2010 of the bank, it cannot be construed as a violation of the provisions of S. 13(3A)." 4.12 In view of the foregoing discussion and reasons, the Tribunal proceeds to hold the SA to be wholly 'unsustainable' and dismisses the same eventually. No order as to costs. Handover. (Dictated to my PA directly on the computer, corrected and pronounced by me in the open Tribunal on this the 31st day of July, 2017)