Banking Institutions are profusely empowered under the SARFAESI Act, 2002 to recover their dues from the defaulting loan borrowers, and rightly so. However, sometimes the banking authorities proceed blindly and obtusely against the borrowers in violation of set rules as prescribed under the SARFAESI Act and Rules, causing grave injustice and suffering to the innocent borrowers and thus rendering the entire recovery proceedings as bad in law.
Proceedings before DRT Allahabad.
Against similar irregularities committed by Banking Authorities, an aggrieved borrower couple situated in Varanasi approached learned DRT Allahabad by the way of an Appeal provided under Securitization Application under Section 17 of the SARFAESI Act assailing the entire Auction Sale Proceedings and Possession Order issued by the ADM under Section 14 of the SARFAESI Act.
The grievance of the borrowers was that the bank is proceeding illegally against them and is trying to take forcible possession of their sole residential house which they have mortgaged before the bank against a home loan of Rs. 11 Lakhs. It was the case of the borrowers that they have been regularly repaying the loan installments, but due to some financial crunch, they had defaulted in the payment of installments, which led the bank to declare their loan account as NPA. The bank had further initiated recovery proceedings against the borrowers under the SARFAESI Act and had served them with the Demand Notice, u/s. 13(2) of the Act asking for the payment of an outstanding amount of Rs. 10,18,014/-. The bank further served the Possession Notice under Section 13(4) of the Act and took symbolic possession.
At this stage, the borrowers approached the bank officials and requested them to withdraw the recovery proceedings as they are not wilful defaulters and only need some further time to pay their outstanding dues given their poor financial condition. Upon such a request made by the borrowers, banking officials directed them to pay a sum of Rs. 5 Lacs and assured them the recovery proceedings initiated by the bank will be withdrawn and the loan account will be regularised again. Abiding by the assurance given, the borrowers immediately paid Rs. 5 Lacs to the bank.
However, the borrowers were shocked when the bank did not keep its commitment and proceeded to issue Sale Notice u/s. Rule 8(6) of the Security Interest (Enforcement) Rules, 2002 and had further mentioned the outstanding amount as Rs. 10,18,014/- despite the fact that the petitioner had already deposited Rs. 5 Lacs after the symbolic possession. The banking officials further committed significant irregularity by keeping the reserve price of the property worth more than 50,36,000/- as mere Rs. 21,06,000/-, thus considerably undervaluing the same without obtaining the report of the valuer as required under Rule 8(5) of the said Rules.
Even after this, the borrowers further paid the bank a sum of Rs. 1,30,000/-, but the said amount was also not adjusted towards the outstanding amount as per the Demand Notice and Possession Notice and the bank continued to proceed with the sale/recovery proceedings in an unlawful manner and ultimately sold the property of the borrowers at a throwaway price of Rs. 21,16,000/-. Thus, despite the fact that the borrowers had deposited a total of Rs. 6,30,000/- before the auction sale, the said amount was not adjusted and the property had been auctioned at a throwaway price to claim the outstanding amount which was mentioned in the Demand Notice, Possession Notice, and Sale Notice, which is bad in the eyes of law.
The bank had further erroneously approached the District Magistrate after the Sale under Section 14 of the Act to seek forcible possession and the concerned ADM had also unilaterally passed the Possession Order without taking note that the bank had deliberately concealed the fact regarding the deposit of Rs. 6,30,000/- by the borrowers.
The Outcome.
The learned DRT, Allahabad took notice of the said facts and agreed to hear the Application for Interim Relief. Upon hearing the submissions made by the counsel for the borrowers, the learned tribunal proceeded to grant interim protection to the borrowers and ordered that all the parties shall maintain "status quo" over the property in question, thereby restraining the bank authorities from taking forceful possession of the same in pursuance of the auction sale and the possession order issued by ADM.
The said Securitisation Application on behalf of the bank was filed and argued by Advocate Devesh Saxena, (Managing Partner at S&D Legal Associates) along with Advocate Tarun Pratap Singh.
Read Order: