High Court Gujarat (17.02.2023) In M/s Abaj Foods Pvt. Ltd. Vs. Punjab National Bank [R/Special Civil Application No. 2676 of 2023] held that;
The notice which does not give the break up of the principal and the interest amount in the notice under Section 13 (2) of the SARFAESI Act, then such notice is contrary to the provisions of the Section 13 of the SARFAESI Act.
Excerpts of the order;
# 1. Learned advocate Mr.V.N.Sevak has prayed that he may be permitted to file appearance during the course of the day. The same is granted.
# 2. Learned advocate Mr.Aditya A. Gupta has submitted the paper book pursuant to the order dated 16.02.2023, the same is ordered to be taken on record.
# 3. Heard learned advocate Mr.Aditya A. Gupta for the petitioners and learned advocate Mr.V.N.Sevak for the respondent no.1.
# 4. This petition is preferred by the borrower and guarantor who have availed financial assistance from the respondent Bank. It is the case of the petitioners that the account of the borrower became non performing assets (NPA) account in the year 2016. The respondent Bank initiated proceedings under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ( for short ‘SARFAESI Act’) by issuing notice dated 30.04.2018 under Section 13(2) of SARFAESI Act. The respondent Bank advanced term loan of Rs.15,00,00,000/- and balance outstanding as on 31.03.2018 was stated to be Rs.14,34,08,824.52/-.
# 5. The respondent Bank thereafter withdrew the notice dated 03.04.2018 and issued a fresh notice on 03.01.2022 under Section 13(2) of the SARFAESI Act, however the respondent Bank mentioned the balance outstanding as on date of NPA 31.03.2018 as 14,34,08,824.52/- without giving break up of principal and interest amount outstanding from the respondent Bank. The responded Bank only pointed out recorded interest on 03.01.2022 + other charges amounting to Rs.8,69,80,317.98/- and shown the total outstanding as on 03.01.2022 as Rs.23,03,89,142.50/-. Therefore in the notice dated 03.01.2022, there is no break up of principal and outstanding amount as on the date of NPA is stated by the respondent Bank.
# 6. Learned advocate Mr.Aditya Gupta for the petitioner submitted that the notice issued by the respondent Bank on 03.04.2018 which is withdrawn as well as the notice dated 03.01.2022 issued are contrary to the decision of the Division Bench of this Court in case of Punjab National Bank Vs. Mithilanchal Industries Pvt. Ltd. reported in 2020 SCC OnLine Guj 3441. It was submitted that the Division Bench of this Court has held that the notice which does not give the break up of the principal and the interest amount in the notice under Section 13 (2) of the SARFAESI Act, then such notice is contrary to the provisions of the Section 13 of the SARFAESI Act. Learned advocate Mr.Gupta invited the attention of this Court to the paragraph nos.29 to 33 of the aforesaid judgment to point out that without breakup of the outstanding amount of principal and interest it would not be possible for the borrower to make representation as required under Subsection (3A) of Section 13 of the SARFAESI Act as the borrower would not have any detail of the amounts found due and payable by the secured creditors and being demanded as such by notice under Subsection (2) of Section 13 of the SARFAESI Act and in such circumstances the petitioner would not be in a position to make any representation or make any objection as amounts outstanding under different heads are not provided by the responded Bank.
# 7. On the other hand learned advocate Mr.Sevak submitted that the notice dated 03.01.2022 which was issued after withdrawal of the notice dated 03.04.2018 by the respondent Bank has mentioned interest which has accrued on the date of outstanding amount on NPA but the breakup of the principal amount and the interest on the date of NPA is not provided.
# 8. Having heard the learned advocates for the respective parties and having considered the facts of the case, it would be necessary to refer to the following observations made by the Division Bench in the case of Punjab National Bank Vs. Mithilanchal Industries Pvt. Ltd. (Supra) which reads as under:-
“29. The words used in Section 13(3) of the SARFAESI Act are “details of the amount payable by the borrower as also the details of the secured assets intended to be enforced by the Secured Creditor.” So, the notice under Section 13(2) of the SARFAESI Act has to necessarily contain the details on the above two counts.
30. Insofar as the first part is concerned i.e. regarding the amount payable by the borrowers, if the intention of the Legislature was only to provide the total outstanding amount or the aggregate amount outstanding and payable by the borrowers, the language would have been different. It would not have been necessary to incorporate Sub-Section (3) in Section 13 of the SARFAESI Act. In Sub-Section (2) of Section 13 of the SARFAESI Act, it is also mentioned that the Secured Creditor may require the borrower by notice in writing to discharge in full his liabilities to the Secured Creditor. The said liabilities would be mentioned in view of the provisions of Sub-Section (2) itself. But, consciously, Sub-Section (3) was incorporated so as to ensure that the details of the amount payable are provided in the notice. Such details would include the relevant calculations made by the Bank under different heads which had become due and payable at the end of the borrower.
31. There is another reason for incorporating Sub-Section (3). Sub-Section 3(A) gives right to the borrower to make a representation or raise an objection against the notice under Sub-Section (2). Unless the borrower has the details of the amounts found due and payable by the Secured Creditor and being demanded as such under a notice under Sub- Section (2), the borrower would not be in a position to make any representation or raise any objection. It is only when the amounts under different heads are provided to the borrower that it could raise objection under any of the heads where the borrower finds that the amount quantified is not correct. Without there being any details mentioned in the notice, the very purpose of Sub-Section 3(A) would also be lost to a large extent.
32. From a perusal of the material on record and as also discussed not only by the Tribunal but also the learned Single Judge there was an issue raised earlier and pending between the parties regarding the rate of interest at which the Secured Creditor was calculating. According to the borrower, the rate of interest was higher as was being applied by the Secured Creditor than what actually it could claim under the agreement. The learned Single Judge had referred to such facts in paragraphs 5.1 to 6.1 of the judgment. The learned Single Judge had also placed reliance upon the view taken by the Patna High Court as also the High Court of Calcutta while interpreting the provisions of Sub-Sections (2) and (3) of Section 13 of the SARFAESI Act.
33. For all the reasons recorded above, the first argument canvassed before us being devoid of any merits is accordingly rejected.”
# 9. On perusal of the record, it is not in dispute that the balance outstanding as on date of NPA 31.03.2018 amounting to Rs.14,34,08,824.52/- is the same amount as mentioned by the respondent Bank in the earlier notice dated 03.04.2018 as amount outstanding on the date of NPA + interest from 01.10.2017, therefore admittedly there is no breakup of the outstanding amount under different heads of principal amount and interest pertaining to term loan of Rs.15,00,00,000/- advanced by the respondent Bank to the borrower.
# 10. In view of the above facts there is a good prima facie case in favour of the petitioners as the notice under Section 13(2) of the SARFAESI Act is contrary to the decision of the Division Bench in case of Punjab National Bank Vs. Mithilanchal Industries Pvt. Ltd. (Supra). Therefore for the purpose of granting interim relief during the pendency of the securitisation application, this petition is allowed and the respondent Bank is restrained from taking any possession of the secured assets of the petitioners pursuant to the notice dated 03.01.2022 issued under Section 13(2) of the SARFAESI Act and the action under Sections 13(4) and 14 of the SARFAESI Act till the final disposal of the Securitisation Application No.436 of 2022 pending before the Debt Recovery Tribunal.
# 11. This order is passed as the Debt Recovery Tribunal is not available as on today. The Tribunal shall hear both the sides for the final hearing of the Securitisation Application in due course. The contention to be raised on behalf of both the sides are kept open to be raised before the Tribunal at the time of final hearing of the Securitisation Application. Both the sides are therefore relegated to the Tribunal for further proceedings.
# 12. In view of the aforesaid direction, the petition is accordingly disposed of. Notice is discharged. Direct service is permitted Today.
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