The petitioner availed a Cash Credit Limit of Rs. 75 lakhs and a housing loan of Rs. 10 lacs from Punjab National Bank. As security, the petitioner mortgaged his property i.e. residential house along with land measuring 01 kanal, falling under Survey No. 215 min, Khata No. 64 min and Khewat No. 07 situated at Toph Sherkhania, Tehsil and District Jammu [residential house bearing No. 37-A, Bharat Nagar, Talab Tillo, Jammu].
However, the petitioner defaulted in repayment of installments which resulted in classification of the loan account as Non Performing Asset [NPA] on 30.09.2010 as per the Reserve Bank of India Guidelines, and the borrower was intimated accordingly.
On finding no response from the borrower, the bank was compelled to issue a demand notice under Section 13 (2) of the SARFAESI Act followed by notice under Section 13 (4), respectively.
Also Read: What FM Sitharaman said about High-Level Committee for Banking Reforms
Meanwhile, the Bank approved One Time Settlement (OTS) of the loan amount and intimation in this regard was given to the borrower vide letter dated 14.11.2017 with explicit stipulation – “Please note that if full payment is not received as per under mentioned terms and conditions, bank shall proceed to recover the entire dues after adjusting the payment, if any, received”.
One of the terms and conditions of the OTS was that the borrower was enjoined upon to make the payment within a period of three months towards full and final settlement. However, the petitioner failed to pay the amount as per OTS Scheme, resultantly, the bank went onto proceed in terms of Section 13 (8) of the SARFAESI Act, followed by publication of e-auction sale notice in two newspapers, and same finally culminated by way of sale intimation letter dated, 28.08.2024.
Also Read: SBI, PNB or BoB: In which Bank does Government keep its Money?
The bone of contention of the petitioner is that notices under Section 13 (2) and 13 (4) of the SARFAESI Act came to be issued before the OTS Scheme, therefore, the action of the respondent-Bank in initiating the action under Section 13 (8) of the SARFAESI Act is illegal, because, according to the petitioner, the respondent-Bank once, offered to settle the account under the OTS, any action taken prior to that loses its significance and as such, the bank was mandated to proceed from the very inception.
The other ground urged by the petitioner is that as per the OTS Scheme, he could not make the payment of total outstanding loan amount, nevertheless, he had paid Rs. 30 lacs, therefore, bank was required to adjust the same and also thereafter, he was willing to settle the amount but without any rhyme and reason, the bank has rejected his offer, as such, according to the petitioner, the action of the bank in auctioning the secured assets is also bad in law.
Also Read: Net Profit of Banks in Q3FY26, Check Top Bank
Further submission of the petitioner is that the notices under Section 13 (2) and 13 (4) of the SARFAESI Act have been issued prior to One Time Settlement, as such, amount mentioned therein do not fall within the definition of secured debt, therefore, e-auction sale notice and sale intimation letter are liable to be quashed.
The petitioner after availing the loan facility failed to repay the same as per the terms and conditions and when the bank initiated the proceedings under SARFAESI Act, the petitioner has filed number of suits and writ petitions by concealing the material facts, therefore, he played fraud on the Courts and also illegally withheld the loan amount, which obviously, is the public money.
Also Read: All Agency Banks will remain open on 31 March, RBI gives Order
The main plank of argument of learned counsel for the Bank is that the petitioner admittedly failed to repay the loan amount, compelling the Bank to take recourse to recover the outstanding loan amount under the provisions of SARFAESI Act, which finally culminated in issuance of e-auction notice which has been finalized, but because of the litigation, it could not be completed, therefore, once, e-auction notice is issued and the petitioner failed to repay the amount, in that event, his right to redeem the secured assets also extinguishes, as such, prays for dismissal of the petition.
Court Order
Loan account of the petitioner was classified as NPA and thereafter, action under Section 13 (2) and 13 (4), of the SARFAESI Act was taken as the petitioner failed to repay the loan amount. However, despite the petitioner failed to repay the amount even after issuance of notice under Section 13 (4) of the SARFAESI Act, and possession of the secured asset said to have been taken over by the Bank, the bank could not immediately, proceed in terms of Section 13 (8) of the SARFAESI Act as during the interregnum period, the bank has accepted the proposal for OTS and thus, communicated to the petitioner for one time settlement of loan amount within a period of three months with a specific stipulation that if full payment is not received as per the terms and conditions within a period of three months, the bank shall proceed to recover the entire dues.
Also Read: Rs 6.50 crore gold missing from Punjab National Bank in Rajasthan
Court said that the right of the petitioner to redeem the secured assets stand extinguished with the publication and culmination of auction process, therefore, peripheral pleas raised by the petitioner also do not stand the scrutiny of law.
Court said that bank is free to complete the process of e-auction and to proceed in terms of sale intimation letter dated 28.08.2024.
Download Court Order PDF (This PDF is available for Premium Users Only. Click here to join premium)
