DRAT (2025.08.28) in Bank of Baroda Vs. J. P. Associates and Ors., [(2025) ibclaw.in 219 DRAT, Appeal Dy. No. 31/2024”],held that;
In my opinion, once the notice under Section 13(2) of the SARFAESI Act has been issued by the Bank and the representation/objection is received from the borrowers, then it is obligation on part of the Bank to carry the matter to its final conclusion by considering and deciding the objections/representation received from the borrowers.
Thus the Tribunal below has rightly held that without deciding the objection/representation of the borrower, the second notice under Section 13(2) of the SARFAESI Act is not valid.
Excerpts of the Order;
# 1. The present appeal has been filed under section 18 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short “the SARFAESI Act”) against the impugned order dated 06.12.2023 passed by DRT, Lucknow, whereby the S.A. No. 736 of 2023 filed by the respondents-borrowers was allowed.
# 2. The brief facts of the matter are that the respondent no. 1, which is a proprietorship firm, was granted a cash credit facility of Rs. 90.00 lacs vide sanction letter dated 05.09.2016 by the appellant-Bank. In order to secure the said facility, the respondent no. 4 created an equitable mortgage over her property in question by depositing the title deed with the appellant-Bank. Since the respondents-borrowers did not maintain the financial discipline, therefore, the account was classified as NPA on 16.09.2022 and demand notice dated 01.10.2022 was issued under section 13(2) of the SARFAESI Act, but it appears that due to certain technical reasons, the Appellant-Bank had withdrawn the said notice by issuing a letter dated 05.01.2023 and issued a fresh demand notice dated 12.01.2023. Since the respondents-borrowers did not pay any heed to the demand as raised by the Bank, therefore, a possession notice dated 21.03.2023 was issued under section 13(4) of the SARFAESI Act, which was published in the newspapers on 24.03.2023. The appellant-Bank further moved an application under section 14 of the SARFAESI Act before the ADM (Judicial), Shahjahanpur, which was allowed vide order dated 26.07.2023 directing the Bank to obtain the physical possession of the property in question.
# 3. The respondents-borrowers challenged the entire proceedings of the appellant-Bank by filing S.A. No. 736 of 2023 before the Tribunal below, which was allowed by the Tribunal below vide order impugned on the ground that the representation/objection dated 22.11.2022 filed by the respondent no. 3 (applicant in the S.A.) pursuant to the first demand notice dated 01.10.2022 has not yet been decided by the appellant-Bank. Being aggrieved by the said order, the present appeal has been filed by the appellant-Bank.
# 4. Learned counsel for the appellant-Bank submitted that short question involved in the present case is that first demand notice dated 01.10.2022 was given to the respondents, against which they filed objection under section 13(3A) of the SARFAESI Act before the appellant-Bank, but the said notice was not acted upon, therefore, the same was recalled by the Bank on 05.01.2023. It was further contended that thereafter another demand notice dated 12.01.2023 was sent to the borrowers and pursuant to which the possession notice dated 21.03.2023 was issued under section 13(4) of the SARFAESI Act and sent to the borrowers-guarantors through registered post and the same was also published in two newspapers on 24.03.2023. It was also contended that subsequently an application under section 14 of the SARFAESI Act was moved before the District Magistrate, which was allowed on 26.07.2023. The order dated 26.07.2023 passed by the ADM (Judicial), Shahjahanpur as well as the entire proceedings initiated by the Bank under the SARFAESI Act were challenged by the respondents-borrower before the Tribunal below by filing S.A. No. 736 of 2023.
# 5. Learned counsel for the appellant also submitted that the Bank has never received the objection under section 13(3-A) of the SARFAESI Act against the first demand notice from the borrowers. It was further submitted that even if it is assumed that the same was received, the same will have no consequence because the first demand notice was withdrawn by the Bank. In support of his contention, the learned counsel has relied upon a judgment passed by the Hon’ble Chhattisgarh High Court in M/s Dauji Farms Ltd. and Ors. Vs. Dena Bank and Anr. reported as AIR 2009 Chhattisgarh 22 (Writ Petition (C) No. 5928 of 2006, decided on 05.11.2008 and has referred to paragraphs 19,20 and 21 of the said judgment. It was, therefore, prayed that the order impugned may be set aside and the appeal may be allowed.
# 6. Learned counsel for the respondents-borrowers submitted that they had filed an objection under section 13(3A) of the SARFAESI Act before the appellant-Bank against the first demand notice, which has not yet been decided and the same is still pending. It was further contended that without deciding the same, the second demand notice could not be issued and thus the issuance of second demand notice and the subsequent proceedings cannot be sustained in the eye of law. The next contention of the learned counsel was that the judgment, as relied upon by the learned counsel for the appellant, passed by the Hon’ble Chhattisgarh High Court in the matter of M/s Dauji Farms Ltd. Vs. Dena Bank (Supra) would not apply in the present case, because the judgment, which has been referred to in the order impugned, is a judgment of the Hon’ble Division Bench of the High Court passed in Writ C. No. 31812 of 2010 in the year 2010 i.e. after two years of the judgment cited by the learned counsel for the appellant, therefore, it was contended that in the present matter, the judgment of the Hon’ble Division Bench will apply. It was lastly contended that in the last paragraph of the impugned order, it has been left open for the appellant-bank to initiate fresh proceedings, if required, against the respondents, therefore, no adversity has been caused to the appellant, therefore, the present appeal deserves to be dismissed with heavy costs.
# 7. Heard the learned counsels for the parties and considered the material available on record.
# 8. It is to be seen that the appellant-Bank had issued a demand notice dated 01.10.2022 to all the borrowers/guarantors, which was duly served upon them on 11.10.2022, against which an objection under Section 13 (3-A) was filed by the borrowers, but due to some technical reason, the said notice was withdrawn by the Bank vide letter dated 05.01.2023 and issued fresh demand notice dated 12.01.2023, which was served upon all the borrowers/guarantors through registered post. Thereafter possession notice dated 21.03.2023 under Section 13(4) of the SARFAESI Act, which was also served, affixed at the conspicuous place of the property in question and published in the newspapers on 24.03.2023. Pursuant to the said notices, the appellant-Bank moved an application before the ADM (Judicial), Shahjahanpur under Section 14 of the SARFAESI Act, which was decided vide order dated 26.07.2023 directing the Bank to obtain the physical possession of the property in question.
# 9. The said proceedings of the appellant-Bank have been quashed by the Tribunal below vide order impugned on the ground that without deciding the objection under Section 13(3-A) of the said Act, the appellant-Bank could not have issued fresh demand notice.
# 10. Thus the core question for consideration before this Tribunal is, as to whether the Bank was justified in issuing the fresh demand notice after withdrawing of first demand notice without deciding its objection or not?
# 11. Chapter IIIrd of the SARFAESI Act deals with Enforcement of Security Interest. Section 13(2) provides for classifying the secured debt as non-performing asset (NPA). In that event, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within 60 days from the date of notice. In case of default, it is provided for taking possession of the secured assets of the borrower by taking recourse to several measures as prescribed under Section 13(4) of the said Act. Sub-section (3-A) of Section 13 provides an opportunity to the borrowers for making representation against the said notice and in case the representation is made, the secured creditor shall consider the same and if comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate within 15 days of receipt of such representation or objection, the reasons for non-acceptance of the representation or objection to the borrowers.
# 12. In the present case, the first demand notice under Section 13(2) of the SARFAESI Act was issued on 01.10.2022. A representation was made by the respondent no. 3 on 22.11.2022, but the same has not been decided as it is admitted by the Bank itself in paragraph no. 5.7 of the memo of appeal. In this regard, the contention of the Bank that it has never received the said representation, therefore, the same could not be decided, is not tenable, because the Tribunal below at page no. 5 of the order impugned has clearly mentioned “to prove service of the objection the applicant had annexed the copy of courier receipt” and the same has not been controverted anywhere by the Bank.
# 13. The judgment passed by the Hon’ble High Court, Chhattisgarh in M/s Dauji Farms Ltd. Vs. Dena Bank (Supra), which is relied upon by the learned counsel for the appellant is prior to the judgment passed by the Hon’ble Allahabad High Court in Writ-C No. 31812/2010-Anand International (Regd.) and Ors. Vs. Union of India & Ors. Decided 08.11.2010, which is relied upon by the Tribunal below while quashing the proceedings of the Bank vide order impugned, therefore, the same would not apply in the present set and circumstances of the present case.
# 14. In my opinion, once the notice under Section 13(2) of the SARFAESI Act has been issued by the Bank and the representation/objection is received from the borrowers, then it is obligation on part of the Bank to carry the matter to its final conclusion by considering and deciding the objections/representation received from the borrowers. Thus the Tribunal below has rightly held that without deciding the objection/representation of the borrower, the second notice under Section 13(2) of the SARFAESI Act is not valid.
# 15. In view of the aforesaid, the order impugned does not call for any interference by this Appellate Tribunal. Thus the appeal filed by the Bank deserves dismissal. Accordingly, the present appeal is dismissed with no order as to costs.
# 16. A copy of this judgment be forwarded to the parties as well as the DRT concerned and be also uploaded on the e-DRT Portal.
--------------------------------------------------------
No comments:
Post a Comment