L N CONSTRUCTIONS AND OTHERS v. CANARA BANK

IN THE DEBTS RECOVERY TRIBUNAL-II AT HYDERABAD

DATED THIS THE 25IH DAY OF JANUARY, 2024

PRESENT: SH. RAMESHWAR KOTHE, B.com, L.LB.(Hons.). it,a.

PRESIDING OFFICER

Securitization Application No.232 OF 2021

1. M/s LN Constructions Rep by its Sri S. Vinay Kumar Reddy Managing partner

Flat No.107. Karan Residency Green View Lane

Bowenpally. Secunderabad

2. S. Venkatram Reddy S/o Late S. Narayan Reddy Aged about 59 years, Occ:Business Flat No.307, Srinivasa Apartments Hasmathpet, Bowenpally

Secunderabad-500 011

3. P. Satyajith Reddy S/o P. Ram Reddy Aged about 54, Occ: Business Flat No.81, Green View Apartments Journalist Colony, Jubilee Hills Hyderabad

4. P. Jyothi Reddy Wo^P. Satyajith Reddy Aged about 51, Occ:Housewife Flat No.81, Green View Apartments Journalist Colony, Jubilee Hills Hyderabad

.,,....Applicants.

Versus

1. Canara Bank Specialized Mid Corporate Branch Vista Grand Tower, Rajbhavan^Road Rep by its Authorized Offic:er OW"

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2. K.R. Sudarshan Reddy S/o Late K.R' Govind Reddy Aoed about 64 Yrs

oic: Business, AF-3, Stone Valley Road No.4, Banjara Hills Hyderabad-34.

3. K.R. Subhashini W/o venkata Reddy 3-5-835, HYderguda Hyderabad

4. Shaik Mohammed H ussain H. No.3-6211, Main Bazar Kesamudram, IngurthY Warangal.

Counsel for the APPlicants Counsel for l't Res\ondent Bank Counsel for 4th Res?ondent Respondents 2 & 3

sA No.232l2021

Apartment

.......Res?ondents'

:Sri K. Srinivasa^Rao

: Sri Dishit Bhattachaiee :'ri^{GvN Babu}

: Ex parte -:g-B-D-E-R:-

1. The Applicants filed the present Securitisation Application u/s¹⁷ of^the Securitization and Reconstruction of Financial Assets^and Enforcement of Security Interest Act, 2002 (hereinafter "the Act" for short) to set aside SARFAESI proceedings including auction held^on t7.0g.2022 pursuant to auction sale notice dated 10'08'2022ⁱⁿ respect of SA schedule properties

2. The case of the applicants as per averments of the application, in brief, is that the 1st applicant is a partnership firm consisting Vinay Reddy, P. Satyajith Reddy and K.R. Sudarshan Reddy as partners and it involved in construction business. At the time of availing credit facilities, A to H schedule properties have been mortgaged as security. D(.$

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3ofg sA No.232l2021 The respondent bank released G and H properties belonging to^2nd respondent without consent of other partners and also did not keep for sale the property situated at^MLA Colony, Banjara Hill mortgaged by 2nd respondent's wife. Had the said property been sold the entire debt would have been cleared. This collusive act of respondents 1 and 2 makes the liability of applicants discharged as per Secs.139,¹⁴⁰ and 141 of the Indian Contract Act, 1872. The respondent bank did not demonstrate fair play.

3. The respondent bank failed to serve demand notice, possession notice as per Secs.13(2) and 13(4) of the Act in respect of application schedule property and also failed to publish and affix the possession notice as per Rules 8(1) and 8(2) of the Securlty Interest (Enforcement) Rules, 2002 ("Rules" for short). The applicants have not been served with 30 days prior notice under Rule 8(6). The sale notice dated 13.10.2021 was not affixed on conspicuous place of property as per Rule 8(7). The valuation obtained is meagre and fixing the reserve prices based on such valuation is bad in law. Hence this SA.

4. The 1st respondent bank filed reply statement which has been adopted by the 4th respondent-auction purchaser. The submissions, inter-alia, are that M/s LN Constructions availed SOD facility of Rs.5.75 crores, WCTL facility of Rs.2.54 crores, FITL facility of Rs.47.30 lakhs, BG limit of Rs.1 crore and COVID FITL facility of Rs.38.94 lakhs and the same are secured by mortgage of mortgage of six number of properties apart from personal guarantees. After availing credlt facilities, the applicant did not malntain the account properly and hence the account became NPA on 31.03.2021. Despite receipt of demand notice dated 12.04.2021 issued u/s Sec.13(2), the t2/\V<,u//,/ -<.4\'-l

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4of8 sA No'232/2021 applicants did not come forward to liquidate the debt and hence possession notice dated 06'07 '2021 u/s 13(4) was issued^and published in Indian Express and Saakshi daily newspapers and affixed

on secured assets. The applicant also did not respond to Sec 13(8)

notice dated O4.Og.2o21 providing 30 days for redemption^of mortgages and therefore sale notice dated 25 10 2021 was issued

fixing auction of secured assets on 29'f1'202L' The same^was published in Times of India and Eenadu daily newspapers'^The valuation was obtained from approved valuer and reserve price fixed

at Rs.16.88 crores. The properties are secured assets as deflned u/s

2(zc) of the Act. The respondent bank has duly followed the procedure

of law while proceeding against the secured assets for realization of

secured debt and hence the applicants do not deserve any relief'

5. Learned counsel for the parties reported that orders may^be passed basing on record. Perused the written arguments filed^by applicants, 1st respondent bank and the 4rh respondent-auction purchaser and also perused the material brought on record

6. Now, the points that arlse for consideration are;-

(i) Whether the appticants made out anY valid ground to quash the SARFAESI measures initiated by the^1st ,espondent bank inctuding auction conducted^on 17.0g,2022 in pursuance of e-auction sale notice dated

10.08 2022 in respect of SA schedule properties under the provisions of the SARFAESI Act' 2002,?7fily,/,u

(ii) To what relieP^' "

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SANo.232l2O2l Point No.(i):-

7. The primary contention of applicants is that the properties belonging to 2nd respondent and his wife were neither released nor put to auction sale collusively. The property of 2nd respondent situated at MLA Colony itself is worth more than Rs.10 crores and they relied on judgement of Hon'ble DRAT Delhi in IJCO Bank vs. Achal Bansal 2009

(2) Banking Cases P 63 in support of their contention that the entire debt would have been liquidated had that one property been auctioned. They also relied upon judgement of Hon'ble Apex Court in State Bank of Sourashtra vs, Chittaranjan Ranganath Raia AIR 1980 SC P I52B wherein it was held that since the creditor released two properties of principal debtor without the consent of the guarantors, the provisions of Secs,139 and 141 of the Contract Act discharge the surety. Hence SARFAES measures of the 1st respondent bank may be set aside.

B. While reiterating the contentions made in the reply statement, the respondent bank further contends that the applicants are alleging frivolous allegations to delay and derail the legitimate recovery process of the bank and it may not be allowed. The respondent bank relied upon judgements of Hon'ble Supreme Court in Dnvandeo Sabaji Naik and Another vs. Pradnva Prakash Khadekar and others (2017.) 5 Supreme Court cases 496 and Dalip Singh and Others vs. State of Uttar Pradesh 2010 2 SCC 114. It is fufther submitted that the applicants are alleging violation of procedures and even in case of minor procedural errors shall not vitiate the entire proceedings in toto. Reliance^is placed on Hon'ble Supreme Court judgement in L&T Housina Finance Ltd. vs. Trishul Developers and Another (2020) 10 Supreme Court Cases

659. Therefore SA may be dismissed.

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6of8 5A No'232/2021 9.^The 4th respondent-auction purchaser sailed with^lst respondent bank.

10.^The appticants are not disputing availment of credit facilities froml"trespondentbankandcreationofmortgageinrespectofSA schedule properties as security' In the cited

judgement in Bank of

sourashtravs.chittaranjanRanganathRajacase,thesecuredcreditor lost the pledged oil tins due to negligence worth of which' if sold'

Wouldhavedischargedthedebtofprincipaldebtor.Questionof restitution was also involved in the cited case in combined application

of Sections 139 and 141 of the indian Contract Act No such loss of

property is involved in the case on hand The subject proPerty in the

cited judgement was movable property whereas

in the instant case' it

is an immovable property' As per applicants' the immovable property

of^2nd respondent-guarantor has been released' However' the

applicants have not shown any legal provision that the secured

creditormustinthefirstinstanceproceedagainstpropertiesof principal debtor and then only against properties belonging to

guarantors in case of default Therefore' the contention of collusion^is

not accePtable.

11.^The 1st respondent bank flled material documents along with^the reply statement as per which, the demand notice dated 12'04'2021

was served on partners/guarantors of 1st applicant flrm vide postal

acknowledgement cards. Besides service' the demand notice^{was also}

published in English and Telugu newspapers The possession notlce dated 06.07.2021 was also received by partners/guarantors vide

postal acknowledgement cards placed at pages 42 and 43 of reply statement. The possession notice was published in Sakshi and Indian

Express, Telugu and English newspapers respectlvely on 08'07'2021' ,&v..vu. lY'&

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7 of8 SA No,232l202l Photographs at pages 50 to 55 shows afflxture of possession notice in open plots. Hence I find no infraction of Rutes 8(1) and B(Z) of the Rules,2002.

12. The applicants took speciflc contention in main applica on and amended applications that Rule 8(6) notice prior to auction notice dated 13.1O.2027 was not issued and affixed. The postal acknowledgement cards at pages 61 and 62 annexed to reply statement evidence service of redemption notice dated 04.09.202f under Sec.13(8). The said sale notice was served on pa rtners/g u a ra ntors vide postal acknowledgements at pages 75-84, published vide paper clippings at pages 85 and 86 and affixed vide photographs at pages 94-99 of material papers annexed to the reply statement. i find no deviation of Rule 8(6), 8(7) and 9(1) of the Act.

13. The respondent bank obtained valuation report from its approved valuer. Except making a general statement that the reserve price fixed was meagre, the applicants have not filed valuation obtalned by them to prove their contention. Hence their contention as to undervaluation is baseless.

74. It appears from material record that the applicants earlier moved the Hon'ble High Court as and when auction sale notice was issued. Before issuing the latest auction notice dated 10.08.2022, the applicants filed wP No.23411 ot 2022. The Hon',ble High court

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15,Inviewoftheaboveobservations'IfindthattheapPlicants failed to make out any ground to set aside any of the SARFAESI measures initiated by the respondent bank against the SA schedule

properties and accordingly SA ls liable to be dismissed' Point No.(ii):

16. In the result, SA fails and hereby dismissed'

17. Consequently, Interlocutory ApPlications pending if any' shall stand disPosed of.

18. No order as to costs' Communicate a copy of this order to^the parties concerned,

(Typed to my dictotion by the Ps, corrected' siqned ond prcnounced by me in the^open

couft on this the 25th doy ol lonuory' 2024)'

^A z//YY<.syv

'/ / ,/ '^<-.u\/ t,/

(hrdtsnwan rorxe)

PRESIDING OFFICER

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