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CaseIQ

MS BRIJWASI CYCLE STORE v. UNION BANK OF INDIA

Debts Recovery Tribunal

Jun 6, 2025

Judgment

Subsequent
References

CaseIQ

DEBTS RECOVERY TRIBUNAL-2, CHANDIGARH

ITEM NO.21

SA/23/2022 M/S BRIJWASI CYCLE STORE Vs UNION BANK OF INDIA AND OTHERS

06.06.2025

Argued by: Mr. Hemant Chaudhari Advocate (through VC) along with Sh. Sunil Kumar Bhardwaj, Applicant in person (SA)

Mr. Pancham Sharma Advocate for the Respondent Bank

Mr. Sunil Kumar Dahiya Advocate for the Insurance Company M/s Brijwasi Cycle Store (Applicant) has filed this Securitization Application under Section 17 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 against Union Bank of India (Erstwhile Andhra Bank) and others (Respondents).

2. The case of the Applicant, as set up in the application, is that it is a proprietorship firm and Mr. Sunil Bhardwaj is its sole Proprietor. It is carrying on the business of sale and purchase of bicycles at plot No. 308, 309, Balaji Plaza/Complex, Oppo. Metro Pillar No. 871, Delhi Rohtak Road, Nehru Park, District Bahadurgarh, Jhajjar. It had availed the following credit facilities from Respondent No.1:-

"A. Loan Account No. 166430100005279- Term Loan for an amount of Rs.

68.32 lakhs towards purchase of Commercial Property at: Plot No. 308/2013- 2014, 309/2013-2014, situated near Ashirwad Banquet Hall, Balaji Plaza, NH-10, Gurunanak Pura (Nehru Park), Delhi-Rohtak Road, Bahadurgarh. Sanctioned vide Sanction Letter dated 23.03.2016 having reference number 1664/16/TL/28. B. Loan Account No. 166413100000007- Open Cash Credit Account (Renewal cum Reduction) towards working capital requirement against Stocks in trade and book debts. Last renewed on 26.02.2019 vide sanction letter dated 26.02.2019 having reference number 0682/52/ZLCC(B)/B-49/03/S-320 with new limit of Rs. 30.50 lakhs (Reduced from 35 Lakhs).

C. Loan Account No. 166439100005686- Property Term for the Loan for an Amount of Rs. 75,00,000/- against the Mortgaged property bearing Double Storey housing admeasuring 172 sq. yards & total covered area 1080 sq. ft. on the ground floor & covered area of 720 sq. ft. on the first floor with RCC build up on the first floor situated at Plot No. 2-26 Opposite Shiv Madir Anaj Mandi Malgodam Road within MC area of Bahadurgarh, jointly in the name of Sunil Kumar Bhardwaj, Mr. Mewa Ram Sharma, Saroj Devi and Anil Bhardwaj.

D. Loan Account No. 166418100000502-for the Loan for an Amount of Rs. 13,50,000/- against the Mortgaged property being Hypothecated stocks consisting of bicycle, tube & other accessories etc. at Malgodamroad near shiv murti Aggarwal Colony, Bhadurgarh, Haryana-124507 and collateral security as Commercial+ Residential (Triple Storied) property situated at part Khewat No.

736 Khatouni No. 1029 Mustkil and Killa No. 48/14/3, 14/4 situated near Bahadurgarh Railway station Bahadurgarh admeasuring 130 sq. yards in the name of Sh. Mewa Ram, Devi Ram, Saroj Devi."

The sanction letter for loan account No. 166430100005279 is Annexure A-2; for loan account No. 166413100000007 is Annexure A-3 and for loan account No. 166418100000502 is Annexure A-4. To secure the same, Applicant and guarantors had created security interest in respect of the following properties:-

"a) EMD of Residential land & building (One and half story) situated at Plot No. 36 & 37, Khewat No. 68/54 Khata No. 74 Kila No. 27/26,49/51 mouja parnala Johri Nagar, Line Paar, Bahadurgarh Measuring 165 Sq. yards in the name of Smt. Saroj Devi W/o Mewa Ram.

b) Balaji Complex (basement) situated opposite Metro Pillar No. 871. Nehru park, Guru Nanak Colony, Delhi- Rohtak Road, Bahadurgarh within the limit of Municipal council Bahadurgarh in the account of M/s Brijwasi Cycle Store

(commercial property) (full basement floor only without terrace rights) bearing plot No. 308/2013-2014, 309/2013-2014 situated at near Ashirwad banquet hall, Balaji plaza, NH-10, Gurunank Pura (Nehru Park, Bahadurgarh Distt. Jhajjar).

c) Double Storey housing admeasuring 172 sq. yards & total covered area 1080 sq. ft. on the ground floor & covered area of 720 sq. ft. on the first floor with RCC build up on the first floor situated at Plot No. 2-26 Opposite Shiv Madir Anaj Mandi Malgodam Road within MC area of Bahadurgarh, jointly in the name of Sunil Kumar Bhardwaj, Mr. Mewa Ram Sharma, Saroj Devi and Anil Bhardwaj.

d) Commercial+ Residential (Triple Storied) property situated at part Khewat No. 736 Khatouni No. 1029 Mustkil and Killa No. 48/14/3, 14/4 situated near Bahadurgarh Railway station Bahadurgarh admeasuring 130 sq. yards in the name of Sh. Mewa Ram, Devi Ram, Saroj Devi."

It is alleged that at the time of availing the afore-mentioned loans, Respondent Bank had informed it that since the property will be under mortgage during the term of the loan, stock and other items, which shall be stored in the premises, will have to be covered under a 'Shop Keepers Insurance Policy' being offered by United India Insurance Company and the premises will have to be covered by insurance for the value of the structure as per Engineer's valuation, for fire and earthquake. In fact, this was as per the terms and conditions of the sanction letter dated 23.03.2016. The Respondent Bank also informed the Applicant that it has a tie-up for insurance business with United India Insurance Company. Accordingly, the insurance cover will have to be availed through the Bank only. In fact, it was also a pre-condition for the sanction of the Term Loan. The Bank also informed the Applicant that all the formalities for availing the requisite insurance policies will be managed by the Bank itself for which the Bank will auto-deduct the amount towards insurance premium directly from the account of the Applicant.

Applicant states that its proprietor signed all the documents. Since the Respondent Bank had represented that it will be responsible for the insurance of the premises and the stocks, he (Applicant) never took any separate insurance policy for the property and the stock in trade. It is alleged that from time to time, Bank deducted the amount of insurance premium from his account. However, no document of insurance, such as, insurance policy or cover note was ever provided by the Respondent Bank. When he enquired the Bank Officials in this regard, he was informed that all the documents are required to be retained by the Bank itself during the term of loan as the properties are under mortgage. Applicant also states that as per the terms and conditions of the sanction, the property had to be valued by the valuers and engineers for which purpose, the site verification and valuation was carried out. A copy of the Engineer's Valuation Report with photographs evidencing his site visit is Annexure A-6. Further, as per the terms and conditions of the sanction letter for the Term Loan against the property as well as for the Cash Credit Facility for the stock, it was required that the Applicant would submit the financial statements, balance sheets and other financial documents to the Respondent Bank from time to time including at the time of renewal of OCC Limit. Applicant states that in compliance of the said requirement, he continued to submit all the documents from time to time and the Bank had never any grievance in respect of the same. However, the Respondent Bank fraudulently got the insurance for the lesser value of stocks. It is stated that on 29.11.2019 at about 9:00 p.m., a major fire broke out at his property, which completely destroyed the property, stocks, some cash and the documents. He made all possible efforts to control the fire. However, on account of the nature of stocks, i.e. cycles having rubber tyres, the entire stock was destroyed. Applicant states that on the very next day, he intimated Mr. Vidya Charan Upadhayay, Branch Manager, who himself

visited the property to verify the incident. On his request to lodge the insurance claim, Respondent Bank handed over to him a bunch of documents which included a copy of the Standard Fire and Special Perils Policy issued by the Reliance General Insurance Company Limited insuring the stocks between 31.03.2019 till 30.03.2020. A copy of the insurance policy handed over by the Respondent Bank to the Applicant on 30.11.2019 is Annexure A-7. It is stated that since the Respondent Bank was an agent of the Applicant for the purpose of insurance policy, it sent intimation to Respondent No.3 regarding fire incident and filed the appropriate application. On receiving the said policy document from Respondent No.1, Applicant came to know that the Bank had insured the stock for Rs. 50 lacs only against the stock of Rs. 2 crores which was lying in the property. He immediately pointed out this discrepancy to Respondent No.2, who had no answer to the same. Applicant also asked for other policy documents of the previous years. However, Respondent No.2 ignored his request and directed the Applicant to approach the Insurance Company. On account of the substantial loss suffered by the Applicant, it also made a request to the Respondent Bank for financial help in the form of fresh loan. However, the Bank did not give him any fresh loan. Instead it declared the account of the Applicant as Non-Performing Asset. Applicant states that to avoid any further complications, he continued to make the payment of monthly instalments to the Bank up to March 2020. However, there was a complete lockdown. Thereafter on account of Covid-19 Pandemic, RBI announced moratorium for all types of loan accounts. Applicant states that he made many requests to the Bank to grant him additional loan facilities to rebuild his business. However, his request was deferred by giving false assurances that the matter was under consideration. Applicant states that he was taken aback on 25.03.2020 when he came to know that Respondent No.3 has rejected his insurance claim for the

stock on the ground that the loss location is different from the risk location mentioned in the policy. It was also stated in the repudiation letter that the affected location is situated at basement and it is a breach of warranty mentioned in the policy schedule, 'Risk is Not situated in Basement'. A copy of the letter of the Insurance Company repudiating his claim is Annexure A-8. Applicant states that Respondent No.1 was aware from day one the exact location of the property. The property was in basement in the building named Balaji Plaza. In fact, as per the terms and conditions of the sanction letter, physical site verification was done by Respondent No.1 in the year 2016 and thereafter every 2 years. Accordingly, the Bank had the knowledge that the property was in basement. However, for the reasons best known to the Bank Officials, Respondent No.2 in connivance with Respondent No.3 got the address of the property wrongly mentioned in the Insurance Policy as 'Ground Floor' instead of 'Basement'. It is also stated that Respondent No.1 had changed the Insurance Company to Respondent No.3 and the policy of Respondent No.3 is not to cover any risks located in the basement. Applicant also states that Respondent Bank suppressed the fact that the address of the insured property was wrongly mentioned in the policy documents and for that reason, did not provide a copy of the same to the Applicant and continued to deduct the premium. It is also stated that Respondent No.1 also took the insurance policy from Respondent No.3 by falsely declaring the address of the Applicant as 'Ground Floor' instead of 'Basement' and despite having valuation of the stock of Rs. 2 crores and above, only applied for insurance of Rs. 50 lacs towards the stock. It is also stated that the Respondent Bank was debiting amounts from time to time towards the Insurance Premium. Applicant states that on 03.07.2020, he again approached the Branch Manager, who made a false assurance to disburse additional loan. The Branch Manager requested the Applicant to first sign certain

documents as procedural formality. One of such documents stated that the Applicant will not file any case in respect of Insurance Policy against Andhra Bank. However, the Applicant after going through the contents of the letter, refused to sign it and asked the Branch Manager to provide a copy of the same. However, the Branch Manager refused to supply the copy. Applicant states that he addressed many communications to the Respondent Bank and also filed a complaint with CM Window. However, the Bank instead of redressing his grievances, issued him a notice dated 21.09.2020 through his counsel for non- payment of monthly instalments. Vide letter dated 21.09.2020, Applicant was coerced to give up his claim. A copy of the letter dated 21.09.2020 is Annexure A-

11. It is stated that in response to his letter dated 18.09.2020, the Branch Manager vide letter dated 09.12.2020 completely evaded his liability and shifted the same on to the Applicant and Insurance Company (Respondent No.3). A copy of the letter dated 18.09.2020 and Respondent's reply dated 09.12.2020 is Annexure A-

12. Applicant states that aggrieved by the conduct of the Bank, he approached the Banking Ombudsman-II. However, the Banking Ombudsman dismissed his complaint. It is also stated that the Applicant was also constrained to file a consumer complaint on 15.02.2021 with Haryana State Consumer Disputes Redressal Commission which is pending. Applicant states that without any intimation to him and against RBI guidelines, on 31.03.2021, Bank declared his account NPA and issued him a notice under Section 13(2) of the Act on 23.04.2021 asking him to make the payment within 60 days. It is stated that the Applicant was also constrained to file a complaint in the Court of Judicial Magistrate, Bahadurgarh who was pleased to take cognizance of the same. After inquiry by the police, a report was filed that Respondent Nos. 1 and 2 had committed severe offences of cheating, fraud and forgery. It is stated that the

Applicant wanted to make the payment of his loan as per the repayment schedule. He also tried his level best to arrive at some amicable settlement. However, in the meanwhile, on 29.01.2022, Bank issued the notice under Section 13(4) of the Act. On 31.01.2022, Bank published the possession notice. It is stated that Applicant was constrained to file CWP No. 4226 of 2022 in the Punjab and Haryana High Court. However, the Punjab and Haryana High Court orally suggested him to seek his remedy under the SARFAESI Act. Applicant states that he is still ready to settle the account. On these facts, Applicant filed the present SA stating that the impugned notices under Sections 13(2) and 13(4) of the Act be set-aside; SARFAESI action be declared null and void and it be declared that the Applicant is not liable to pay the amounts mentioned in the notices and the Bank be restrained from taking any action against the secured asset. The Applicant also prayed that he be awarded compensation against the Respondents.

3. This SA was filed on 09.03.2022. Notices of the SA were given to the Respondents. Despite the fact that number of opportunities were granted to the Respondent Bank, it did not file any reply. Accordingly, vide order dated 09.03.2023, the right of the Respondent Bank to file reply was closed. It was found later on that Insurance Company is also a party and no notice of the SA had been given to it. Accordingly, on 19.04.2024, the notice was given to the Insurance Company.

4. The Insurance Company in its reply has alleged that this Tribunal has no jurisdiction to adjudicate any insurance claim. The Insurance Company is neither a secured creditor nor it has taken any measures under the SARFAESI Act. However, it is admitted that it had issued the policy (Annexure R3/2). It is also stated that the copy of the policy is usually sent to the insured in the normal course of business. The Bank was having the agency code of the Insurance Company. The

policy was effected at the instance of the Bank. Even in the letter dated 09.12.2020 written by the Bank to the Applicant in reply to complaint dated 18.09.2020 of the Applicant, it was categorically mentioned that the Bank had got the security insured. It is admitted that a claim was lodged and the same was declined. Further as per the declaration, the insured risk was situated at 'Ground Floor' and accordingly, the policy was issued which categorically stated that the 'Risk Location' is 'Ground Floor'. It is admitted that the insurance was for the shop and the stock. Accordingly, it is stated that the SA against the Insurance Company be dismissed.

5. I have heard Mr. Hemant Chaudhari, counsel for the Applicant; Mr. Pancham Sharma, counsel for the Respondent Bank and Mr. Sunil Kumar Dahiya, counsel for the Insurance Company.

6. Apart from making oral submissions, all the parties have filed written arguments.

7. Mr. Hemant Chaudhari, counsel for the Applicant in his oral as well as written arguments, has submitted that the Applicant had availed the loans and he was making the payment of the same as per the repayment schedule. Unfortunately, on 29.11.2019, a fire took place in the premises of the Applicant. The stock and the building of the Applicant were destroyed. As per the terms and conditions of the loan, the Bank was under obligation to get the property and the stock insured. However, the Bank neither got the property nor the stock insured for the value of the stock. Mr. Chaudhari submitted that in fact the Bank and the Insurance Company were hand-in-glove. The Insurance Company repudiated his claim on the ground that the fire incident had not taken place at the 'Risk Location' and accordingly, the Insurance Company was not liable. Mr. Chaudhari further submitted that on the one hand, the Applicant suffered the loss on account of fire

incident; on the other hand, the Bank wrongly declared his account NPA and started making the claim for the money. Counsel further submitted that the act of the Bank is wholly illegal, null and void. Accordingly, the SARFAESI action be set-aside and the Bank be also directed to pay compensation to the Applicant for the wrongs committed by it. Mr. Chaudhari further submitted that the Bank was given many opportunities to file reply to the SA but it did not file any reply. The case of the Applicant has gone unrebutted. Accordingly, the SA be allowed.

8. Per contra, Mr. Pancham Sharma, counsel for the Bank has argued that the Applicant has included all the loan accounts in the present SA which cannot be done. Further the Applicant had got the building and the stock insured. As such it is bound by the terms and conditions of the Insurance Policy. There was no fault on the part of the Bank. There is no merit in the SA and the same bs dismissed.

9. Mr. Sunil Kumar Dahiya, counsel for the Insurance Company has argued that the Bank was the agent in this case. In case, anything has been done wrongly by the Bank, it is liable for the same and the Insurance Company cannot be fastened with any liability. He has further argued that the insurance claim can only be adjudicated by the Consumer Commission and not by the Debt Recovery Tribunal. In fact, the Debt Recovery Tribunal has no jurisdiction to adjudicate any insurance claim. Accordingly, it is stated that the SA against the Insurance Company be dismissed.

10. I have considered the rival contentions.

11. Admittedly, the Applicant had raised the following loans from the Respondent Bank:-

"A. Loan Account No. 166430100005279- Term Loan for an amount of Rs.

68.32 lakhs towards purchase of Commercial Property at: Plot No. 308/2013- 2014, 309/2013-2014, situated near Ashirwad Banquet Hall, Balaji Plaza, NH-10,

Gurunanak Pura (Nehru Park), Delhi-Rohtak Road, Bahadurgarh. Sanctioned vide Sanction Letter dated 23.03.2016 having reference number 1664/16/TL/28. B. Loan Account No. 166413100000007- Open Cash Credit Account (Renewal cum Reduction) towards working capital requirement against Stocks in trade and book debts. Last renewed on 26.02.2019 vide sanction letter dated 26.02.2019 having reference number 0682/52/ZLCC(B)/B-49/03/S-320 with new limit of Rs. 30.50 lakhs (Reduced from 35 Lakhs).

736 Khatouni No. 1029 Mustkil and Killa No. 48/14/3, 14/4 situated near Bahadurgarh Railway station Bahadurgarh admeasuring 130 sq. yards in the name of Sh. Mewa Ram, Devi Ram, Saroj Devi."

12. It is also admitted on the record that to secure the same, Applicant had created security interest in respect of the following properties:-

"a) EMD of Residential land & building (One and half story) situated at Plot o. 36 & 37, Khewat No. 68/54 Khata No. 74 Kila Nno. 27/26,49/51 mouja

parnala Johri Nagar, Line Paar, Bahadurgarh Measuring 165 Sq. yards in the name of Smt. Saroj Devi W/o Mewa Ram.

b) Balaji Complex (basement) situated at opposite Metro Pillar No. 871. Nehru park, Guru Nanak Colony, Delhi- Rohtak Road, Bahadurgarh within the limit of Municipal council Bahadurgarh in the account of M/s Brijwasi Cycle Store (commercial property) (full basement floor only without terrace rights) bearing plot o. 308/2013-2014, 309/2013-2014 situated at near Ashirwad banquet hall, Balaji plaza, NH-10, Gurunank Pura (Nehru Park, Bahadurgarh Distt. Jhajjar).

c) Double Storey housing admeasuring 172 sq. yards & total covered area 1080 sq. ft. o the ground floor & covered area of 720 sq. ft. on the first floor with RCC build up on the first floor situated at Plot No. 2-26 Opposite Shiv Madir Anaj Mandi Malgodam Road within MC area of Bahadurgarh, jointly in the name of Sunil Kumar Bhardwaj, Mr. Mewa Ram Sharma, Saroj Devi and Anil Bhardwaj.

It is also not denied that the Applicant had got the building and the stock insured. There is also no dispute between the parties that a fire incident had taken place on 29.11.2019 and the stock was destroyed. It is admitted on the record that the Insurance Company has repudiated the claim of the Applicant on the ground that the 'Risk Location' was different from the place where the incident had taken place. As per the Insurance Company, the risk as per the terms and conditions of the Insurance Policy was in respect of the 'Ground Floor'. However, the incident had taken place in the 'Basement' and the basement was not insured.

13. The question which arises for consideration is, 'whether in the facts and circumstances of the case, the Bank was justified in initiating the SARFAESI action?' Before I come to this aspect of the case, this deserves to be mentioned that as far as the Insurance Claim is concerned, this Tribunal has no jurisdiction to adjudicate the same. It is only the Civil Court or the Consumer Commission which is competent to adjudicate such a claim and award compensation for the same.

14. In this case, Applicant had taken the loans in the year 2016 and 2019. Admittedly, the fire incident in the business premises of the Applicant had taken place on 29.11.2019. The Insurance Company repudiated the claim in March 2020. As per the Applicant, he continued to make the payment of the instalments till March 2020. The Bank declared the account NPA on 31.03.2021 and thereafter initiated the SARFAESI action by issuing the notices under Section 13(2) on 23.04.2021 and 13(4) on 29.01.2022. It is apparent from the above that when the Bank initiated the SARFAESI action, the Applicant had already suffered the loss on account of fire. As per the Insurance Company, the Bank was acting as its agent and the Applicant had submitted the claim for the same. Neither the Bank nor the Insurance Company has produced on the record any application for insurance. In fact, the case of Insurance is that it was an online form which was filled in by the Bank. It is also admitted on the record that the Insurance Company had repudiated the claim on the ground that it does not insure loss suffered in the basement. This shows that the Bank knowing it fully well that the goods were lying in the 'Basement' and the Insurance Company does not issue a policy for the 'Basement', got the insurance for the 'Ground Floor'. The insurance was for Rs. 50 lacs. As a result of the illegal act of the Bank, Applicant suffered the loss. In these circumstances, I am of the considered view that the Bank was not justified in initiating the SARFAESI action. In case, the Bank had taken into consideration the

loss suffered by the Applicant, it would not have declared the account of the Applicant as NPA.

15. Before I part with this judgement, this deserves to be mentioned that of late it has been observed that there is an unholy alliance between the Banks and the Insurance Companies. As per the terms and conditions of the loans, the stock and the properties have to be insured. The Insurance Companies know that they can get their insurance business from the Banks. Accordingly, they approach the Banks to market their insurance business and pay commission to the Banks for marketing their insurance business. Over a period of time, many malpractices have evolved in respect of the insurance business. Many a time, gullible customers are defrauded by the Banks and the Insurance Companies. Cases have come to light wherein customers visiting the Bank for banking business are duped by issuing insurance policies to them and debiting their accounts with the insurance premium. Many a time, senior citizens and old ladies become victims of such frauds. There is an urgent need to stop such practices.

16. In the case in hand also, the Applicant relied upon the Bank for the insurance. However, the Bank officials gave the wrong 'Risk Location', which resulted in the repudiation of the claim by the Insurance Company. Apart from setting-aside the SARFAESI action by the Bank, it is hereby ordered that the Bank would pay compensation of Rs. 5 lacs to the Applicant. It is clarified that this compensation has been awarded for illegally declaring the account of the Applicant as NPA and not for the insurance claim, which will be adjudicated by the Consumer Court.

17. For all these reasons, I hereby set-aside the SARFAESI action taken by the Bank. Accordingly, the SA is hereby allowed.

18. A copy of this Final Order be furnished to all the parties free of cost.

19. Registrar of this Tribunal is also directed to send a copy of this Final Order to Central Consumer Regulatory Authority for taking appropriate action in the matter.

Pronounced in the open Tribunal (A.S. Narang)

Dated: 06.06.2025 Presiding Officer

ANJ DRT-2, Chandigarh (Additional Charge)