SIVA SAI POULTRY LAYER FARM v. CITY UNION BANK LIMITED

IN^THE DEBTS RECOVERY TRIBUNAL-II^AT HYDERABAD

DATED THIS THE 16TH DAY OF MAY, 2023

PRESENT: SH. RAMESHWAR KOTHE, B'Com' L'LB' (Hons')' M'A'

PRESIDING OFFICER

Securitization Application No'¹⁵OF 2019 M/s Siva Sai PoultrY LaYer^Farm Parumanchala^(V)

Jupadu Bumglow^(M)

Nandikotkur Taluk

Kurnool Distrcit-5 1840¹ Rep by its Proprietor:M. Satyanarayana Reddy .......APPlicants'

Versus

City Union Bank Limited

Credit Recovery and Management Department Admn Office No'24-8, Gandhi Nagar Kumbakonam

Rep by its Authorized Officer

Counsel for the Applicants : Mr' B' Sreenivasa Reddy Counsel for Respondent Bank: Mr' Ambadipudi Satyanarayana -:9_&L E_B:-

1 . The Applicants filed the present Securitisation Application u/s'1 7 of the Securitization and Reconstruction of Financial Assets^and EnforcementofSecuritylnterestAct,2OO2(hereinafter"theAct"

for short) to declare all measures initiated by the respondent bank under Sec.13(4) including auction sale notice dated 06.12.2018 fixing auction on 25'01.2019 as illegal and arbitrary' /4Y\e/^ (/' {'s"'

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sA No.15/2019

2. The case of the applicant, in brief, is that the applicant engaged in poultry business. It availed credit facilities from respondent bank in 2014. Its business was adversery affected due to Bird Fru and hence there was delay in making payments. In splte of having knowledge of the difficulties, the respondent bank classified the roan account as NpA whereas it was not and initiated SARFAESI measures by issuing demand notice dated 04.09.2018 for Rs.3,29,00,791/_ within 60 days. The applicant issued repry dated 29.10.2018 with certain objections to the demand notice. Without issuing any reply to the objections as per Sec.13(34) of the Act, the respondent bank issued possession notice dated 06.12.201g under sec.13(4) of the Act which was affixed on mortgaged properties and it was neither served nor published in two leading newspapers as per Rules B(1) and g(2) of the Rules' Thereafter Tender cum Auction sare Notice dated L2.t2.20t8 under Rule 8(6) of the Security Interest (Enforcement) Rures, 2002 (hereinafter "the Rures,, for brevity) was issued which was received by the applicant on 26.L2.2018. without waiting for 30 days to expire from the date of notice of sale, the respondent bank pubrished the e-auction sare notice in 'Andhra Jyothi' Telugu newspaper on l4.l2.2OIg. The e_auction sale notice was neither affixed on consprcuous place of schedule properties nor pubrished in two reading newspapers as stipulated under Rule 8(7) and 9(1) of the Rules. The reserve price fixed is very compared to its market value. The respondent bank failed to provide 30 days for redemption and issued e-auction sale notice against Rules 8(6) and 9(1) of the Rules read with Sec.13(B) of the Act and also against the principle laid down by the Hon,bte Supreme Court in Mathew Varghese vs. Amritha Kumar case and ow"

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3of8 SA No.15/2019 Hon'ble High Court for the State of Telangana and for the State of Andhra Pradesh in Amarender Reddy vs' Canara Bank case' It is further averred that all^the schedule properties are^not mortgaged properties for the loan. Item No'3 property ls partly agriculturallandandthesameisstillundercultivationand therefore, it is exempted from initiating SARFAESI measures^as per Sec.31(i), Without disclosing the fact of pending SA'^the respondent bank obtained orders in Crl MP No'67/2019^from learned Chief Judicial Magistrate-Cum-Principal Assistant Sessions Judge, Kurnool for taking physical possession of^the schedule properties. The respondent bank also suppressed^the fact of existence of unhypothecated livestock, birds etc'' worth^of Rs.1 crore. The respondent bank approached the learned^CJM- Cum-Principal Assistant Sessions Judge under Sec'14, without any jurisdiction. The respondent bank has failed to follow Secs.13(2), 13(34), 13(4) and 13(8) of the Act and Rules B(1)' B(2), B(5), 8(6), B(7) and 9(1) oF the Rules, 2002' Hence this^SA' Therespondentbankfiledreplystatementalongwithdocuments, denying the adverse averments of the application'^The submissions, inter alia; are that; the applicant availed SOD limit of Rs.125 lakhs, term loans of Rs.105 lakhs, Rs'35 lakhs and Rs.15 lakhs and OSL special loan of Rs'60 lakhs' After availing loan facility, failed to repay the same. Hence the respondent bank declared the loan account as NPA on 29.04.2018^and initiated SARFAESI measures. The demand notice dated 04.09,2018 was sent to applicant. A reply dated 14'11.2018^was issued to the applicant to the objections dated 29.10.2018 issued by the applicant to the demand notice and thereby followed Sec.13(34) of the Act. Thereafter, Possessi%notice^ dated (/'.,5.r"

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4of8 sA No.15/2019 26.LL.20L8 was issued by the authorized officer and the same was affixed on schedule property on 26.11.2018 and was published in Deccan Chronicle and Andhra Jyothi newspapers on 30.11.2018. The auction scheduled on 25.01.2019 pursuant to auction notice dated 12.I2.2OtB did not materialize and therefore the averments about the same are redundant. The respondent bank arso fired oA No.3B4l2019 under sec.19 of the Recovery of Debts and Bankruptcy Act before the Tribunal and filed account particulars. The schedule properties are mortgaged to secure the said loan facilities. Item No.3 property is non_ agriculturar rand as no such activity is undertaken thereon. It consists of sheds and structures. The respondent has scrupulousry followed the procedure under the provisions of the SARFAESI Act and Rules framed thereunder while proceeding against the SA schedule properties. Hence the SA may be dismissed.

5. Heard learned counsel appearing for the applicant and the learned counsel for the respondent bank. perused the materiar documents placed on record.

During the course of arguments, learned counsels for the applicant and respondent bank reiterated their respective version as in the application and reply statement.

Now, the points that arise for consideration are;- Whether the applicant has made out any valid grounds to set aside the SARFAESI measures initiated by the respondent bank?

8. Availment of loan facilities and creation of mortgage in respect of SA schedule properties are not much disputed. The contention of

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SA No.15/2019 the applicant is that the respondent bank is proceeding against the SA schedule properties without issuing reply to their objections and wlthout following Secs.13(2), 13(34), 13(4)^and 13(8) of the Act and Rules 8(1), 8(2), 8(5), 8(6), 8(7) and⁹⁽¹⁾ of the Rules, 2002. A perusal of the material documents filed by the respondent bank reveals that the respondent bank issued reply dated 14,11.2018 to the applicant's objections dated 04.09.2018 and the applicant received the same vide postal acknowledgement card filed by respondent bank' Hence, I find^no infraction of Rule 13(3A) of the Act by the respondent bank. 9.^The possession notice was affixed on secured assets 26.11.2018 and published in Telugu (vernacular) and English newspapers^on 30.11.2018 as per material available on record. The applicant himself filed possession notice dated 06.12'2018 with original signature of the authorized officer as per which possession had been taken on 26.11.2018. Hence, I find no deviation in following Rules B(1) and 8(2) of the Rules, 2002.

10. As regards sale notice dated L2.12.20L8 fixing auction^on 25.01.2019, reportedly the auction failed and therefore,^the contentions pertaining to the said auction do not need consideratlon.

11. The other contention of the applicant is that the learned Chief Judicial Magistrate-Cum-Principal Assistant Session Judge^from whom the respondent bank obtained order in Crl MP No.67120L9 under Sec,14 of the Act had no jurisdiction. This issue was closed on 04.07.2019 by this Tribunal in IA No.2684/20L9. The relevant paragraphs are extracted hereunder for better appreciation:

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6of8 SA No.1sl2019

"With regard to jurisdiction of the Chief ludicial Magistrate to entertain petitions u/s 14 of the Securitisation Act in non- metropolita n area, a Division Bench of our Hon'ble High Court in M/s. T,R, lewettery vs, SBI in W,P. 17589 of 2014 decided on 27.11.2014 has held that Chief ludicial Magistrate in non- metropolitan area is competent to entertain petitions u/s 14 of the Securitisation Act. For better appreciation, I may refer the relevant portion of the said judgment and it is thus:-

"Giving jurisdiction to Chief Judicial Magistrate in non- metropolitan area, who are exercising the same functions as that of Chief Metropolitan Magistrates in metropolitan area, would not in any way abrogate or contradict the words used in Section 14 of the SARFAESI Act, thereby causing prejudice to any of the parties, On the other hand, it woutd hasten the process of rendering assistance to the secured creditors to recover possession of their assets thereby achieving the object for which the SARFAESI Act has been introduced. ,..We answer the reference holding that the nomenclature Chief Metropolitan Magistrate referred to in Section 14 is inclusive of Chief ludicial Magistrate in non- metropolitan area and as such the Chief ludicial Magistrate in a non-metropolitan area gets jurisdiction to entertain an application under Section 14 of the SARFAESI Act, 2002."

In view of the said proposition of law, the contention advanced by the applicants in this, does not deserve acceptance.,,

12. Since the contention on jurisdiction of Chief Judicial Magistrate to entertain application under Sec.14 was once found not tenable, the same does not deserve reconsideration.

13. The next plea of the applicant is that half of the ltem No.3 immovable property is agricultural land. There is no dispute about creation of mortgage in respect of Item Nos.1 to 3 schedule properties. The contention of the applicant is that of the Item No.3 property is under agricultural activity therefore liable for exemption under Sec.31(i) of the learned counsel relied on photographs, pattadar pass show that agricultural activity has been carried out thereon. The photographs evidence that part of the land is occupied by the poultry shed and some land is seen with cotton crop. The s0%

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Act. The

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SA No.15/2019 respondent bank claims that it is non-agricultural property. The photographs relied upon by the respondent bank while affixing the notices only show the poultry shed as a backdrop and do not clearly demonstrate about agricultural activity or otherwise. The respondent bank also filed copies of memorandum of deposit of title deeds dated 18.07.20t2, 03.Og.2Ot2 and the letters dated 24.10.2014, 05.L2.20t4, 24.09.20t5, 15.03.2016, 3t.12.20t6, 30.06.20L7 and 29.L2.20t7 executed by the mortgagor confirming creation of mortgage/extension of mortgage for the loan facilities vide pages 22 to 158 of material documents annexed to reply statement. As per schedule mentioned in these documents, the Item No.3 is described as agricultural land. However, the present claim of the applicant is that only 50o/o of the Item No.3 has been used for agricultural purpose. In view of the above proof, I find that the balance of convenience lies with the applicant and accordingly I hold that the 50o/o of the land used for agricultural activity is to be exempted from the purview of SARFAESI Act under Sec.31(i).

14. In view of the above discussion, I find that the applicant could partly succeed in making plea to set aside SARFAESI measures in respect of agricultural part of Item No.3 schedule property while failed to make out valid ground to set aside measures against the Item Nos.1 and 2 schedule properties and non-agricultural part of Item No.3 schedule property. Accordingly SA is to be disposed^of. 15, In the result, the SA is partly allowed holding that the respondent bank shall not proceed against the 50o/o of the land^with agricultural activity in Item No.3 SA schedule property under the provisions of the SARFAESI Act whereas, SA is dismissedⁱⁿ -.4z'/Yttlrrrr:-2.-

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8of8 sA No.1sl201; respect of Item Nos.1, 2 schedule properties and non-agricultural part of Item No.3 schedule property'

Consequently, the Interlocutory Applications pending if any, shall stand disposed of.

No order as to costs.

Communicate a copy of this order to the parties concerned' (Typed to my dictotion by the PS, corrected, signed ond pronounced by me in the open court on this the 16th doy of Moy,2023).

PRESIDING OFFICER

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