MR M S SUBURAMAN vs TAMILNAD MERCANTILE BANK LIMITED on 5 January 2023

1. This Application is filed by the Applicant to set aside the Possession Notice issued by the Respondent Bank u/s 13 (4) of the SARFAESI Act dated 27.07.2021 and equally to declare the Sale Notice dated 22.09.2021 issued by the Respondent Bank is invalid and illegal.

**BRIEF FACTS**

2. The Averments made by the Applicants in the Application are stated as follows:

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3SA 668/2021 & RA 02/2022

2.1 The Applicant is engaged in the Hospitality services and having in the business for the past few decades and equally running a chain of hotels. The Applicant during the year 2005 started, a Restaurant in the name and style of M/s.Sri Saravana Bhavan at Door No.51 at Netaji Apparel Park, Tirupur and another Restaurant in the name and style of M/s.Sri Balaji Bhavan in the year 2006 at the same address of M/s.Sri Saravana Bhavan is located at Tirupur. Subsequently, the Applicant also started another Restaurant at the same address where the M/s.Sri Saravana Bhavan & M/s.Sri Balaji Bhavan is located during the year of 2007.

2.2 The Applicant at present is also running two Restaurants in the name and style of M/s.Sri Saravana Bhavan (Now branded as Sri Sangeethas) at NH 544 main road, SF No.153/4 A2, Moongil Palayam, Vijayamangalam, Erode and M/s.Sri Sangeethas near Vijayamangalam, Toll Plaza, Perundurai, Erode.

2.3 The Applicant is the customer of the 1^st Respondent Bank since the year 2009 and the Applicant had opened a current Account No.18150050800189 with the bank in respect of M/s.Sri Balaji Bhavan, the current Account No.198150050800289 in respect of M/s.Sri Saravana Bhavan which are functioning at Netaji Apparel Park premises. The Applicant also has a current Account No.198150050800642 in respect of M/s.Sri Saravana Bhavan at Moongil palayam, Vijayamangalam and another current Account No. 198150050800865 in respect of the hotel M/s.Sri Sangeethas, Vijayamangalam, Toll Plaza. The Applicant being the sole proprietor of the Hotels, the two current account are already closed and the latest two current accounts are in operation with the Respondent Bank.

2.4 The Applicant during the year 2014 approached the Respondent Bank for a loan to build new premises so as to open another branch of 4SA 668/2021 & RA 02/2022

the Applicant's Restaurant at his property which is a vacant site at SF. No.153/4 A2 in Vijayamangalam, Erode District. The Respondent Bank having agreed to sanction the loan, a LAP loan (Loan Against Property) was sanctioned for a sum of Rs.60.00 lakhs and subsequently, the Applicant executed the MoDT (Memorandum of Deposit of Title Deeds) in favour of the Respondent Bank in respect of the schedule mentioned properties.

2.5 The Applicant having asked for a loan to build a new building in his own premises whereas, the Respondent Bank officials, especially the then Perumanallur Branch Manager, one Mr.Ponraj had planned a conspiracy in order to cheat the Applicant and prepared the MoDT dated 11.08.2014 wherein, it had stated that the Applicant bought the loan for running a Restaurant in the name and style of M/s.Sri Saravana Bhavan at Door No.51, Netaji Apparel Park, which is run by the Applicant in a place taken on lease for a period of 11 months basis and the Applicant is only the Tenant of the landlord M/s.Netaji Apparel Park. The Respondent Bank on the same day on 11.08.2014 also issued a loan sanction ticket that the Applicant had availed a Housing Loan in the name of M/s.Hotel Sri Saravana Bhavan with the address showing as at NH 544 main road, SF No.153/4A2, Moongil palayam, Vijayamangalam, Tirupur. The Respondent bank and the then Perumanallur Branch Manager, Mr.Ponraj had changed and fabricated the address of the respective premises from Erode to Tirupur so as to suit their convenience to cheat the Applicant and also to defraud the public money of the bank.

2.6 The Applicant was assured by the Respondent Bank and the said Mr.Ponraj that the interest of the Applicants loan is 10% per annum and based on the said assurance, the Applicant availed the loan facilities from the bank. However, in the loan sanction ticket 5SA 668/2021 & RA 02/2022

issued by the Bank, it was hand written and the interest was shown as 13.5% p.a. for the loan. And the Applicant confronted the same with the Mr.Ponraj, it was replied that the interest will be applicable only till the buildings was under construction and thereafter, the Respondent bank will get approval from the RBI and the excess interest collected from the Applicant will be refunded.

2.7 The Respondent Bank is released the loan of a sum of Rs.60 lakhs in eight installments over a period of time from 11.08.2014 to 16.07.2015 after the inspection of the building at all stages. The loan sanction ticket issued by the Respondent Bank wherein no signature of the Applicant was affixed as the Applicant categorically informed the Respondent Bank that the signature shall be affixed only after the rate of interest shall be made as 10% on getting approval from the RBI as promised by the Respondent Bank. Subsequently, the Applicant once again approached the Respondent Bank for another loan so as to purchase the utensils and equipments, for which the Respondent bank sanctioned a loan of sum of Rs.40 lakhs as a MSME loan wherein, it was assured by the bank that the interest rate will be @ 9% p.a., for the loan. However, the Respondent Bank and the said Mr.Ponraj hatched out a conspiracy to cheat with an evil eye to grave the Applicant's property did not mentioned the rate of interest in the sanction ticket, in which the 2^nd loan was sanctioned by the bank. The Applicant also executed a MODT in r/o this loan with the Applicant Bank. The Applicant also clearly stated that the 2^nd loan obtained is or running the Restaurant in r/o M/s.Sri Saravana Bhavan at Door No.51, Netaji Apparel Park, which is running in a leased premise for a period of 11 months. But the Respondent Bank and its officials more specifically the then Branch Manager, Mr.Ponraj planned a conspiracy and created forged and fraudulent sanction ticket in order to cheat the Applicants and to swindle the public fund.

6SA 668/2021 & RA 02/2022

2.8 The Respondent bank and Mr.Ponraj went to the extent of forging the Applicant's current Account No.198150050800289 held at the bank in respect of M/s.Sri Saravana Bhavan at NAP (Netaji Apparel Park) premises and converted the same to M/s.Sri Balaji Bhavan whereas M/s.Sri Balaji Bhavan running in the same NAP premises has its own separate current Account No.198150050800189 without the Applicant's knowledge and concurrence and it is for creating a false illusion that the entity which received the loan was the one at Erode and not the one at Tirupur as per the MoDT executed by the Applicant. Therefore, the Respondent Bank illegally converted the Applicant's loan account from LAP loan to business loan thereby attracting the higher rate of interest which comes around 20% p.a. without intimating and getting concurrence from the Applicant.

2.9 The Applicant having found out that the Respondent Bank was charging a higher rate of interest and hence, the Applicant agitated with the Respondent Bank on multiple times and the Respondent Bank on 27.03.2019 agreed to refund an amount of Rs.4,20,000/- to the Applicant on the condition that the Applicant had to repay Rs.17,10,000/- to the Respondent Bank. On 29.03.2019, the Respondent Bank forced the Applicant to pay a sum of Rs.21,16,024/- and on 13.03.2019 the Respondent Bank have reversed the exorbitant interest amount of Rs.4,47,903/- towards the loan account of Applicant. In the meanwhile, Mr.Manoharan, the then Manager of the Respondent Bank have insisted the Applicant to pay a sum of Rs.1.00 lakh to him for reversal of the interest rate, failing which the interest towards the loan account will not be reduced thereafter by the bank. Accordingly, the Applicant was forced by the Manager to make a sum of Rs.1.00 lakh towards his son's company account maintained with the Respondent Bank branch at Peelamedu, Coimbatore. Subsequently, this was informed to the Managing Director and the 7SA 668/2021 & RA 02/2022

Regional Manager of the Respondent Bank. However, no action was initiated against the Manager, Mr.Manoharan and hence, on 05.01.2020, the Applicant lodged a Criminal Complaint before the Inspector of Police, Perumanallur Police Station vide Receipt No.07/2020.

2.10 The Applicant having sought for the interest rate calculation of the Applicant's loan account and the Respondent Bank having provided the same to the Applicant on 02.07.2019, it is revealed that the Respondent Bank was charging higher rate of interest and the representation made to the bank went in vain. Subsequently, the Applicant also given a compliant through online mode and also by registered post to the banking ombudsman in the month of September'2019 regarding the charging of excess rate of interest and the ombudsman conducted an enquiry. Further on 11.05.2020, the ombudsman passed an order based on a consolation meeting held between with the Applicant and the officials of the Respondent bank. Accordingly, the Applicant approached the Respondent Bank for refund of interest and on 12.05.2020, the Respondent Bank had given a letter to the Applicant whereinm it has sought to provide the proof of existence of M/s.Hotel Sri Saravana Bhavan. It was strange that as how the Respondent Bank is asking for the proof of the existence of the M/s.Hotel Sri Saravana Bhavan wherein, the loan itself stands in the name of M/s.Hotel Sri Saravana Bhavan and all documents executed by the Applicant are with the Respondent bank.

2.11 The Applicant having scrutinized the records through his Auditor and the Applicant noticed the frauds committed by the Respondent Bank such as change of account name, account number, loan account types, address of the entities, rate of interest for the loan etc., and further it is noticed that the Respondent Bank also played fraud upon 8SA 668/2021 & RA 02/2022

the ombudsman that both the loans were not secured when the MoDT was executed in r/o the loan accounts.

2.12 The Applicant having paid a sum of Rs.1,14,00,000/- against the total loan amount of sum of Rs.1.00 crores till date and the Respondent Bank has to pay a sum of Rs.,17.00 lakhs as Refund of excess interest collected from the applicant as per the order of the ombudsmansan and hence, the Applicant is required to pay a sum of rupees around Rs.10.00 lakhs so as to repayment of the loan of the Applicant in its entirety. But the Respondent Bank now demands a sum of rupees around Rs.70.00 lakhs so as to clear the entire loan account of the Applicant. The Respondent Bank is charging exorbitant rate of interest @ 20% from the Applicant, while the both Restaurants of the Applicant were closed for business during the COVID -19 pandemic period prevailed in the country.

2.13 The Applicant in the meanwhile on 15.07.2020 approached the Respondent Bank for a GECL Loan but the Respondent Bank has not responded to the same even though, the property worth about Rs.3.00 coress is already mortgaged with the Respondent Bank. The Respondent Bank is also holding the spare key of the car of the Applicant, in which the Applicant obtained a vehicle loan and repaid the same before two years itself. Hence, the falsification of accounts converting of LAP loan to business loan by fabricating documents, charging excess rate of interests demanding two MoDT for already mortgaged with the bank, classifying the LAP loan as housing loan, showing the valuation certificate as residential and the fraud done with the insurance payment which are falling under the ombudsman scheme and the Applicant approached the ombudsman. However, the ombudsman having asked the Applicant to approach the appropriate forum and hence, on 01.12.2020 the Applicant made a representation 9SA 668/2021 & RA 02/2022

to the Governor & Deputy Governor, Reserve Bank of India, the Chief General Manager, the Chief Vigilance Office, Central Vigilance Cell, etc., with respect to the facts and irregularities committed by the Respondent Bank.

2.14 The Applicant also approached the Hon'ble High Court of Madras by filing Writ Petition No.20110 of 2020 so as to direct the Respondents in the Writ Petition to consider the representation of the Applicant dated 01.12.2020 and on 19.08.2021, the Writ Petition was disposed of stating that the banking ombudsman have issued a communication letter dated 20.01.2020 and has passed an order dated 10.05.2020 and equally a liberty was granted to the Applicant to challenge to the communication letter and the order passed by the Reserve bank of India and accordingly, the communication letter dated 20.01.2021 and the order issued by the banking ombudsman was challenged before the Hon'ble High Court of Madras in Writ Petition No.19129 of 2021 and the said Writ petition is pending before the Hon'ble High Court of Madras.

2.15 The Applicant while pending the Writ petition No.20110 of 2020 before the Hon'ble High Court of Madras, the document related to the issues raised before the Hon'ble High Court of Madras were stolen by one Mr.Satyamorrthy by breaking open the Restaurant of the Applicant and hence, a criminal complaint was lodged before the Inspector of Police, Perundurai Police station and the same was registered in crime no.117/2021 dated 12.02.2021 and the same is also pending for investigation. And on 01.10.2020, the Applicant had also given a complaint to the Superintendent of police, Tirupur with respect to the falsification of Applicant's account amongst other offences by the Respondent Bank and the same is also pending for investigation.

10SA 668/2021 & RA 02/2022

2.16 The Respondent bank while pending the Writ Petition and other proceedings issued a loan Recall Notice dated 16.04.2021 to the Applicant demanding the overdue amount and interest towards the loan account and the Applicant also issued a reply dated 28.04.2021 to the bank. However, without considering the reply given by the Applicant, the bank has issued a Demand Notice dated 05.05.2021 u/s 13 (2) of the SARFAESI Act claiming an outstanding liability of sum of Rs.72,33,235.28 and subsequently, issued a possession notice dated 27.07.2021 u/s 13 (4) of the SARFAESI Act. Further a sale notice dated 22.09.2021 is also issued by the bank in which the schedule date of auction was fixed on 01.11.2021 showing the liability of the Applicant as sum of Rs.76,08,468.71 as on 31.08.2021 and hence, the present SA is filed in challenging the action initiated by the bank under the SARFAESI Act.

3. The Averments made by the Respondent Bank in the Reply statement are as follows:

3.1 The Application filed by the Applicant is with suppression of material fact and mis-statement with several irrelevant facts.

3.2 The Applicant approached the Respondent Bank for grant of various credit facilities against the equitable mortgage created by the Applicant in favour of the Respondent Bank over the schedule mentioned property situated in Erode District and the Applicant having agreed to the various terms and conditions, the Respondent Bank on 11.08.2014 sanctioned a Term Loan-I facility for a sum of Rs.60,00,000/- and on 10.07.2015, a Term Loan -II facility for a sum of Rs.40,00,000/- to the Applicant. The Applicant executed all the loan documents including the Demand Promissory Notes, Loan Agreement etc., in proof of availing the credit facilities. The Applicant also created/extended the mortgage over the fixed asset to be enforced 11SA 668/2021 & RA 02/2022

under the SARFAESI Act and registered the same with the concerned office of the Sub-Registrar vide Document No.2874/2014 on 11.08.2014 so as to secure the Term Loan-I facility for a sum of Rs.60,00,000/- and subsequently, extended the same on 17.07.2015 vide Document No.28075/2015 to additionally secure the Term Loan-II obtained by the Applicant for a sum of Rs.40,00,000/-. Hence, a Security interest is created over the mortgaged properties and thus, the property became the security asset of the bank.

3.3 The Applicant having failed to repay the loan, the accounts were classified as NPA on 31.03.2021. Subsequently, the Demand Notice u/s 13 (2) of the SARFAESI Act is issued to the Applicant on 05.05.2021 demanding a sum of Rs.72,33,235.28 as on 30.04.2021 together with future interest and the same was duly served upon the Applicant on 20.05.2021.

3.4 The Respondent Bank subsequently took possession of the property on 27.07.2021 u/s 13 (4) of the SARFAESI Act and the said notice was received by the Applicant on 29.07.2021 and the same was also published in newspaper namely, "The Hindu" & "Dinanthanthi" in English & Tamil dailies respectively on 28.07.2021.

3.5 The Respondent Bank brought the property for sale on different occasions by issuing the sale notice dated 22.09.2021, 07.12.2021, 03.02.2022, 09.03.2022 and finally on 20.04.2022 fixing the auction on 24.05.2022 and the 2^nd & 3^rd Respondent having participated in the public auction became the successful bidders of the property for a sum of Rs.1,76,10,000/- and the sale certificate is also issued in favour of the purchasers on 31.05.2022 on receipt of the entire sale consideration. The Reserve price for the property was fixed during the 1^st auction sale notice was a sum of Rs.2,05,14,000/- for which there were no bidders and the bank have to issue further four sale notices 12SA 668/2021 & RA 02/2022

and the auction was held on against the 5^th Sale Notice which culminated in selling the property against which the Reserve price was quoted as Rs.1,76,00,000/-. The Respondent Bank recovered a sum of Rs.46,45,161.23 towards the Term Loan-I and a sum of Rs.42,20,611.48 towards the Term Loan-II from the auction proceedings and the Applicant is also liable to pay the future expenses and costs.

3.6 The Respondent Bank deny the averments made by the Applicant that the bank sanctioned a LAP loan instead of the loan for construction of building. As per the letter of sanction of the bank dated 11.08.2014, the bank had sanctioned only Term Loan for construction of building and even the loan agreement executed by the Applicant is towards the construction of the Hotel building. The Agreement relating to deposit of Title Deed bearing Document No.2874/2014 was prepared on behalf of the Applicant by an Advocate and the Applicant himself in his letter dated 28.04.2021 admitted the fact that the loan was an Housing Loan and never claims that it is a LAP loan. The averment made by the Applicant that the loan was sanctioned with the assurance that the rate of interest is @ 10% and the interest rate shown as 13.50% in the sanction letter in handwritten is denied as false. The sanction of loan duly accepted by the Applicant at the rate as quoted in the sanction letter and the rate of interest as mentioned in the Demand Promissory Note dated 11.08.2014 executed by the Applicant is @ 19% per annum. Therefore, the averments made by the Applicant that the assurance given by the bank that the rate of interest is @ 10% is false and is denied by the bank.

3.7 The averments made by the Applicant that the loan was disbursed in eight installments over a period from 11.08.2014 to 13SA 668/2021 & RA 02/2022

16.07.2015 itself established that the loan was granted by the bank for the construction of the building and hence, the disbursement was done in stages, unlike the LAP loan, the disbursement shall be made in a single payment. The Applicant as well as the other guarantor duly accepted the sanction of loan made by the bank by affixing their signatures. The Applicant's averments that the Term Loan-II for a sum of Rs.40,00,000/- is sanctioned @ 9% p.a. is denied and as per the letter of sanction dated 10.07.2015, the rate of interest is stated as "as per credit rating or BRR" and the Applicant had executed a Demand promissory note and the loan agreement dated 11.07.2015 wherein the rate of interest, has been clearly mentioned as 13.35% p.a . Subsequently, a supplement MoDT bearing document No.2507/2015 was executed by the Applicant and prepared by an Advocate acting on behalf of the Applicant.

3.8 The averments made by the Applicant that the Respondent bank and its employee Mr.Ponraj conspired to cheat the Applicant and to grab his property charging him with higher rate of interest is denied as false. As per the terms of sanction, the Applicant has to repay 84 EMIs of Rs.1,29,649/- towards Term Loan-I and another 84 EMIs of Rs.86,076/- towards Term Loan-II. As per the statement of accounts maintained by the bank there has been a credit of Rs.68,66,817.08 including the deposit made by the Applicant and other credits/reversals in regard to Term Loan-I and Rs.43,72,582.78 including the deposit by the Applicant and other credits/reversals in respect of the Term Loan-II. As per the terms of sanction of the loan, the Applicant is duty bound to pay a sum of Rs.1,81,20,900/- towards the EMIs alone. However, the total credits/reversals in the accounts of the Applicant amounts to only a sum of Rs.1,12,39,399.86. Therefore, the Applicant is duty bound to repay the difference amount of Rs.68,81,500.14 plus interest for the period of default and penal 14SA 668/2021 & RA 02/2022

interest as per the sanction letter issued by the bank. The Applicant is liable to pay an interest @ 19% towards the Term Loan-I and 13.35% towards the Term Loan-II.

3.9 The Respondent bank refunded a sum of Rs.4,20,000/- to the Applicant since, the Respondent Bank charged the very high rate of interest is denied as false. The reversal of interest was done at the request of the Applicant as a concession since, the account was out of order and the Applicant had requested for reducing the interest during the default period and therefore, the bank agreed to provide concession to the Applicant by charging the default period interest @ 12.50% as a onetime measure.

3.10 The banking ombudsman through the conciliation meeting held between the Applicant and the Respondent bank passed an order on 11.05.2020. In the meeting, it was agreed by the Applicant to submit various documents such as Government/Regulatory Approvals/Audited Financial Statements in the name of the business unit ie., M/s.Hotel Sri Saravana Bhavan or M/s.Hotel Sri Sangeetha's which generate maximum income to service the loan facilities availed by the Applicant. The Respondent bank having immediately send a letter dated 12.05.2020 and sought for the required documents, for which the Applicant never responded. Subsequently, the Applicant filed fresh complaint with the office of the banking ombudsman and the same was dismissed by the banking ombudsman. The bank sought the proof of existence of the business in the name of M/s.Hotel Sri Sarvana Bhavan because the Applicant had started operating the hotel in an alternative name of M/s.Hotel Sri Sangeetha's as evidenced from the Minutes of the conciliation meeting held at the office of the banking ombudsman. The minutes of the conciliation meeting is self explanatory and the minutes clearly read as follows:

15SA 668/2021 & RA 02/2022

"..... all documents related to name change from M/s.Hotel Sri Saravana Bhavan to M/s.Hotel Sri Sangeetha's should be submitted, all loan documentation and legal formalities related to MoDT should be completed for change of credit facilities in the name of M/s.Hotel Sri Sangeetha's".

The averment of the Applicant that the Applicant has to pay around a sum of Rs.10,00,000/- towards the clearing the loan in entirety is denied as false and as per the Accounts statement maintained by the Respondent Bank. The Applicant is liable to repay a sum of Rs.68,81,500.14 plus interest for the period of default and penal interest as per the sanction letter.

3.11 The Applicant having not complied with the bank's requirement of loan document in protection of bank's interest and that the time line of 30 days prescribed by the ombudsman also having lapsed which was ordered by the ombudsman by its order dated 20.01.2021 and therefore, the complaint of the Applicant was closed under clause 13 (2) is also not an Appealable order. The averment of the Applicant that the GECL loan is denied to the Applicant is false and in fact the Applicant failed to submit any financial documents such as tax papers, GST Certificate and Returns, Audited Financial Statements, business proof along with FSSAI certificate and the local shop establishment certificate from the year 2017, which prove that the Applicant is not only a financial defaulter but also a technical defaulter who cannot be granted a GECL Loan.

3.12 The averments of the Applicant that the Respondent Bank is admitted in their counter filed in Writ Petition No.20110 of 2020 that the falsification of document is not true and on the other hand, the Hon'ble High Court having find no merits in the Writ Petition and dismiss the same with a liberty granted to the Applicant to challenge the same in the manner known to the law. The complaint given by the Applicant with the office of the Superintendent of Tirupur on 16SA 668/2021 & RA 02/2022

01.10.2021 and the same is still pending for investigation before the District Crime branch.

3.13 The Respondent Bank initiated the action under the SARFAESI Act in accordance with law and has not made any manipulation of account as alleged by the Applicant. The Applicant is duty bound to repay the loan with interest @ contractual rate and a fresh documentation and MODT was insisted upon on the Applicant is only based upon the conciliation meeting held before the Ombudsman meeting.

3.14 The Respondent Bank obtained the valuation of the property from an Approved valuer and on which the Reserve price was fixed by the bank and equally, the Respondent Bank served the Sale Notice dated 22.09.2021 to the Applicant on 27.09.2021 through Registered Post with acknowledgement due and equally published the same in the "The Hindu" & "Dinanthanthi" newspaper on 23.09.2021, for which the auction scheduled on 01.11.2021 and hence, a clear 30 days notice is also given as envisaged under the Act. The Applicant only indulged in forum shopping so as to make an attempt to make the bank to come to his terms. And therefore, the actions initiated by the bank under the SARFAESI Act are legal and valid in law.

4. The Averments made by the R2 & R3 in the Reply statement are as follows:

4.1 The Respondents are the bona-fide auction purchaser having paid the sale consideration in pursuance of the sale notice dated 20.04.2022, in which the sale is held on 24.05.2022. The Respondent paid a sum of Rs.1,76,10,000/- and subsequently, issued with Sale Certificate in favour of the Respondent on 31.05.2022. Therefore, it is obligatory on the part of the Respondent Bank seeking assistance of the competent forum to take the actual physical possession of the 17SA 668/2021 & RA 02/2022

property as the Respondent having invested a huge amount of money. The Applicant also lost the right of redemption u/s 13 (8) of the SARFAESI Act. Hence, the Application may be dismissed with costs.

**ARGUMENTS**

5. The Ld. Counsel for the Applicant contended that the National Credit Guarantee Trustee Company Ltd., having issued a Emergency Credit Line Guarantee Scheme (ECLGS) dated 01.04.2021, all the schedule commercial banks, financial institutions, non banking financial companies, the accounts which were classified as standard but not in default for more than 60 days with any lending institution as on 29.02.2020 are eligible for funding under ECLGS and hence, the Applicant's hospitality business is eligible for the scheme. However, the Respondent Bank without considering the scheme and the circular has recalled the Applicant's loan account by its notice dated 16.04.2021 and declared the account as NPA and the proceedings were initiated under the SARFAESI Act which is invalid and illegal.

6. The Ld. Counsel for the Applicant further submitted that the calculation of interest based on MCLR has been determined by the RBI and accordingly, the interest to be collected by the bank is between 8% and 10% as regulated by the RBI. However, the Respondent Bank collected an interest rate @ 20% p.a. even for the Housing Loan Account No.198700480100198 by the bank and hence, the rate of interest charged by the bank is in violation of the RBI norms, which amounts to fraud and cheating the Applicant.

7. The Ld. Counsel for the Applicant further submitted that the excessive collection of the amount by way of exorbitant interest rate and manipulation of the loan account by the Respondent Bank is complained and a FIR has been registered, in which the investigation is also pending by the competent authorities.

18SA 668/2021 & RA 02/2022

1. 8. The Ld. Counsel for the Applicant further submitted that the Respondent Bank had not followed the procedure as contemplated under Rule 8 (1) & 8 (6) of the Security Interest (Enforcement) Rules, 2002 in issuing the Possession Notice and the Sale Notice.

2. 9. The Ld. Counsel for the Applicant further submitted that the reserve price fixed for the schedule mentioned property is Rs.2,05,14,000/- whereas, the market value of the schedule mentioned property is more than Rs.4.50 crores and hence, there is an arbitrariness in fixing the reserve price of the schedule mentioned property.

3. 10. The Ld. Counsel for the Applicant further submitted that the 1^st Respondent has not followed the procedure as contemplated under Rule 8 of the Security Interest (Enforcement) Rules, 2002 in serving a notice of 30 days of time for the sale of the immovable property and thereby allowing the Applicant to redeem the property u/s 13 (8) of the SARFAESI Act.

4. 11. The Ld. Counsel for the Applicant further submitted that the rate of interest @ 19% is unilaterally filled by the 1^st Respondent without the concern and knowledge of the Applicant and thereby committed several acts of manipulation, fabrication and falsification of accounts causing huge monetary loss to the Applicant. The 1^st Respondent for want of wrongful gain had illegally converted the Applicant's loan account from LAP (Loan Against Property) Loan to business loan thereby attracting higher rates of interest which comes around 20% p.a. without intimating the Applicant and hence, the Applicant was made to pay a higher amount of monthly installment and an extended period of loan tenure. The Respondent having refunded the interest amount of a sum of Rs.4,47,903/- to the current account No.198150050800642 of the Applicant which clearly proves that the 19SA 668/2021 & RA 02/2022

Respondent bank charged excess rate of interest and penal interest from the Applicant towards the loan accounts.

12. The Ld. Counsel for the Applicant further submitted that the interest rate initially is shown as 13.50% and 13.35% respectively for the loans availed by the Applicant whereas, the 1^st Respondent Bank manipulated the blanks in the loan agreement and shown the interest rate @ 19% for the loan amount of Rs.60.00 lakhs sanctioned by the 1^st Respondent Bank.

13. The Ld. Counsel for the Applicant further submitted that the Term Loan of Rs.60.00 lakhs advanced the Applicant on 11.04.2014 is repayable in 65 monthly installments of Rs.1,03,137/- each whereas the Term Loan of Rs.40.00 lakhs advanced to the Applicant on 11.07.2015 is repayable in 76 monthly installments of Rs.73,101/- each. However, as on 01.07.2019, as against the loan of Rs.60.00 lakhs, the balance was shown as Rs.34,40,165/- and as against the loan of Rs.40.00 lakhs, the balance was shown as Rs.29,82,533/- in the account. As the Applicant was paying the installment on monthly basis regularly there cannot be such huge balance outstanding as shown by the 1^st Respondent.

14. The Ld. Counsel for the Applicant further submitted that in the month of September 2019 the Applicant had given a complaint through online mode and also by Registered Post to the banking ombudsman regarding the charging of excess interest rate by the 1^st Respondent Bank in r/o the loan account of the Applicants and the banking ombudsman having conducted an enquiry and found that the excess interest came to be charged by the 1^st Respondent bank and hence, the banking ombudsman by its order dated 11.05.2020 directed the Applicant to reconcile the issue with the 1^st Respondent Bank. The Applicant approached the 1^st Respondent bank in pursuant

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20SA 668/2021 & RA 02/2022

to the order of the banking ombudsman, the 1^st Respondent bank not resolved the issues.

15. The Ld. Counsel for the Applicant further contended that the Applicant had repaid a sum of Rs.1,12,39,399.86 till date against the loan availed a sum of Rs.1,00,00,000/- . The 65^th month tenure of the Term Loan Rs.60.00 lakhs ended in January'2020 and therefore, the Applicant had fully discharged the loan by paying all the installment without any default and if the excess amount adjusted towards the dues in r/o the Term Loan Rs.40.00 lakhs. The Applicant is required to pay around of Rs.10.00 lakhs only so as to clear the loan of the Applicant in its entirety.

16. The Ld. Counsel for the Applicant further contended that during the pendency of this Application on 03.02.2022, the Applicant submitted an OTS proposal letter to the Respondent Bank requesting to settle the loan account for a sum of Rs.20.00 lakhs and have enclosed a Demand Draft dated 19.01.2022 for a sum of Rs.18,50,000/- and have also confirmed that on receipt of the acceptance letter from the 1^st Respondent Bank, the Applicant will make the balance OTS amount of Rs.1,50,000/- within a period of one week. However, the Respondent Bank rejected the OTS submitted by the Applicant.

17. The Ld. Counsel for the Applicant further contended that though this Hon'ble Tribunal granted an interim order by which the applicant was directed to deposit a sum of Rs.37,00,000/- in two equal installments being a sum of Rs.18,50,000/- in two parts and the Applicant has not willing deposit the money with the bank and hence, filed a Review Petition before this Hon'ble Tribunal so as to deposit the money with the Registry of this Hon'ble Tribunal. In the meantime, the Respondent Bank issued an auction sale notice dated 03.02.2022 by 21SA 668/2021 & RA 02/2022

which the auction schedule to be held on 23.02.2022 and this Hon'ble Tribunal directed to deposit a sum of Rs.40,00,000/- out of which a sum of Rs.18,50,000/- shall be paid on or before 02.03.2022 and another sum of Rs.1,50,000/- shall be paid on or before 23.03.2022 to the Respondent Bank and the balance amount of Rs.20,00,000/- to be paid to the Respondent Bank on or before 20.04.2022. subsequently, the Applicant preferred an Appeal before the Hon'ble DRAT in AIR No.50 of 2022 against the order dated 23.02.2022, passed by this Hon'ble Tribunal in IA No.2862/2021 in SA No.668/2021 and on 23.05.2022, the Applicant deposited a sum of Rs.36,16,700/- before the Registry of the Hon'ble DRT by way of Demand Draft dated 20.05.2021 towards the pre-deposit u/s 18 of the SARFAESI Act.

18. The Ld. Counsel for the Applicant further contended that the Respondent bank without considering the payment deposited before the Hon'ble DRAT towards the pre-deposit, the property was sold to the 2^nd & 3^rd Respondents for a very meager price much below to the market value of the property and hence, the sale of the schedule mentioned property is invalid and illegal in the eye of law.

19. The Ld. Counsel for the Applicant further contended that the schedule mentioned property is a hotel situated by the side of National highways at Vijayamangalam Toll Plaza. But the Respondent Bank valued the schedule mentioned property as a house property and has reduced the value of the property and sold the same to the 2^nd & 3^rd respondents at a low price.

20. The Ld. Counsel for the Applicant further contended that the Respondent Bank having filed an Application u/s 14 of the SARFAESI Act and the Ld. CJM, Erode having passed an order, the same was also challenged by the Applicant before this Hon'ble Tribunal in SA No.572/2022 and the Hon'ble DRAT by its order dated 23.06.2022, in 22SA 668/2021 & RA 02/2022

the pending Appeal directed an order of status quo till disposal of the Application in SA No.668/2021 & SA 572/2022. In the meanwhile, the 1^st Respondent proceeded and issued a letter dated 30.06.2022 to the Applicant for collection of the balance sale amount. Hence, the 1^st Respondent has committed a fraud upon the loan account of the Applicant and shown the liability amount as sum of Rs.72,33,235.28 as on 13.02.2021.

21. The Ld. Counsel¹ for the Applicant further contended that the rate of interest charged by the Respondent Bank is in higher rate which resulted the actual liability much more higher than the amount to be paid by the Applicant and the Applicant having deposited a sum of Rs.36,16,700/- before the Hon'ble DRAT in AIR NO.50/2022, the sale held by the bank against the Sale Notice dated 20.04.2022 is liable to be set aside by this Hon'ble Tribunal.

22. Per contra, the Ld. Counsel for the Respondent bank contended that the loan was sanctioned by the bank so as to construct a hotel and the schedule mentioned property was given as a security by the Applicant and hence, the security being a secured asset and the loan account became an NPA on default alone, the SARFAESI proceedings were initiated in respect of the Applicant's property and the Respondent Bank has not violated any Rules under the Act.

23. The Ld. Counsel for the Respondent bank further contended that the loan account of the Applicant was regularized four times, the last being on 09.01.2020 and hence, the Applicant was given indulgence by the bank and despite that the Applicant could not regularize the account. The total installment of EMI sanctioned by the bank is 84 and is not 65 as alleged by the Applicant.

24. The Ld. Counsel for the Respondent bank further contended that the Respondent bank has properly obtained the valuation report from 23SA 668/2021 & RA 02/2022

an approved valuer and therefore, there is no under valuation of the property as alleged by the Applicant in the case.

25. The Ld. Counsel for the Respondent bank further contended that the rate of interest as charged by the bank is only at the contract rate as agreed by the Applicant and the Respondent bank and has not made any manipulation as alleged by the Applicant. In fact, the Applicant himself executed a Demand Promissory Note dated 11.08.2014 for a sum of Rs.60.00 lakhs, in which the rate of interest is clearly mentioned as 19% p.a. and therefore, there is no merit on the alleged claim of the Applicant that the interest to be charged by the bank is at a lesser rate.

26. The Ld. Counsel for the Respondent bank further contended that the bank having not committed any violation in initiating the action under the SARFAESI Act and duly followed all the procedures as mandated under the law and the property having sold by the bank, the Applicant shall also lost the right of redemption u/s 13 (8) of the SARFAESI Act and hence, the Application filed by the Applicant may be dismissed by this Tribunal with costs.

27. The Ld. Counsel for the Respondent Bank also contended that the money to be recovered from the Applicant as per the Demand Notice u/s 13 (2) of the SARFAESI Act dated 05.05.2022 is a sum of Rs.72,33,235.28 with subsequent interest and charges and hence, the Respondent is to recover the money lend to the borrowers since the corpus of funding is that of public money. The Ld. Counsel also relied upon a judgment of the Hon'ble Apex Court in the case of "*Indian Bank Vs. M/s.Blue Jaggers Estates Ltd., & Others (2010) 3 SCC 279*" Wherein it held that the "bank is the Trustee of public fund".

28. The Ld. Counsel for the R2 & R3 (Auction purchaser) reiterated the arguments advanced by the 1^st Respondent Bank and equally

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24SA 668/2021 & RA 02/2022

prayed for the dismissal of this Application on the ground that the Applicant has lost the right of redemption u/s 13 (8) of the SARFAESI Act.

**POINTS FOR DETERMINATION :**

29. The points arises for consideration by this Tribunal is that the relief sought by the Applicant is required to be allowed by this Tribunal?

30. The bone of contention raised by the Applicant in the present case is the rate of interest charged by the Bank from the Applicant rather than the legality of the action initiated by the bank under the SARFAESI Act in challenging the Possession Notice and the Sale Notice issued by the bank.

31. This Tribunal having heard the arguments of the Ld. Counsels for the parties and on perusal of the pleadings and evidence(s) adduced before this Tribunal, the following points have emerged for consideration by this Tribunal.

32. Though, the Applicant simultaneously challenged the Possession Notice issued under section 13 (4) of the SARFAESI Act and the Sale Notice issued by the bank and having obtained an interim order from this Tribunal and without compliance of the said order, the Applicant once again preferred a Review Petition in the order passed by this Tribunal in IA No.2862/2021 on the ground that the Applicant is not willing to deposit the sum as ordered by this Tribunal with the Respondent Bank and the money shall be deposited with the Registrar of this Tribunal, which itself shows the attitude of the Applicant that the Applicant not intend to make any deposit against the loan account with the Respondent bank. The Applicant also subsequently once again approached this Tribunal on initiating the action u/s 14 of the 25SA 668/2021 & RA 02/2022

SARFAESI Act by the Respondent bank, in which this Tribunal having granted an interim order to deposit a sum of Rs.40.00 lakhs with the Respondent Bank, the Applicant not only failed to comply the order but preferred an Appeal before the Hon'ble DRAT in AIR No.50/2022 and a sum of Rs.36,16,700/- was deposited towards the pre-deposit u/s 18 of the SARFAESI Act and hence, the said deposit may be considered by this Tribunal against the interim order granted by this Tribunal is nothing but a sheer abuse of the judicial process as the Hon'ble DRAT is not modified the order or granted any stay of the order passed by this Tribunal.

33. This Tribunal having granted an interim order so as to prevent the sale of the property being effected by the bank and on obtaining an order, the Applicant having failed to pay the money as ordered by this Tribunal alone, the Respondent Bank has issued the subsequent sale notice dated 20.04.2022 for which the sale is scheduled on 24.05.2022, in which the property is sold by the bank. The Applicant has no grievances against the procedure adopted by the bank in issuance of the sale notice and conducting the sale or rather produced any evidence to that effect before this Tribunal and only the grievance raised is against the rate of interest charged by the bank is higher than the contract rate of interest as agreed by the Applicant. However, the record reveals in other way wherein, the bank found have charged the interest as agreed between the parties which is reduced in to writing which forms part of the record and as such the argument advanced by the Applicant is not liable to be accepted by this Tribunal with respect to the interest dispute.

34. The loan disbursement is made by the bank in eight installments which clearly evidence that the loan is sanctioned for the building construction and hence, there is credibility on the version of the 26SA 668/2021 & RA 02/2022

Applicant that the loan was sanctioned by the bank as LAP (Loan Against Property) and not for the building construction as alleged by the Applicant.

35. This Tribunal also find no merit on the part of the Applicant in disputing the interest rate in which the loan is sanctioned by the bank as the Applicant and the Bank has entered in to an agreement which cannot be disputed at this stage. Furthermore, the record revealed otherwise and the Applicant is only relying over the complaint made before the Police/other authorities in the ease, which is not sufficient for this Tribunal to grant an order as sought for by the Applicant in a SARFAESI proceeding initiated by the bank under the Act.

36. In the present SA, challenged by the Applicant in so far as the Sale Notice dated 22.09.2021 is concerned, no sale is held by the bank against the said sale notice and as such, the sale notice dated 22.09.2021 became infructuous and hence, no violation can be attributable to the same.

37. The other contention raised by the Applicant is that the valuation of the property, which is sold under the auction sale by the bank. However, there is no material to show that the bank has sold the property without the valuation as mandated under the law. In such circumstances, this Tribunal has to hold that the valuation made by the bank is in accordance with law and hence, there is no merit in the submission made on behalf of by the Applicant.

38. In the above circumstances, this Tribunal finds no reasons to allow this SA as prayed for by the Applicant in granting the relief as sought for in the Application. Therefore, this SA is only required to be dismissed by this Tribunal.

27SA 668/2021 & RA 02/2022

39. The money deposited with the Hon'ble DRAT by the Applicant can be dealt by the Applicant in accordance with the law.

40. The Written Arguments filed by the parties shall forms part of the record.

41. There are no other points pressed during the course of Arguments by either sides. All the pending IAs' if any, are all closed.

**RA No.02/2022**

42. This RA is filed by the Applicant so as to Review the order passed by this Tribunal in IA No.2862/2021 in SA No.668/2021.

43. It is the submission of the Ld. Counsel for the Applicant that this Hon'ble Tribunal having passed an order in which this Hon'ble Tribunal ordered the Applicant to deposit a sum of Rs.37.00 lakhs to the Respondent bank in two equal installments and thereby the proposed auction sale scheduled to be held on 30.12.2021 is stayed till 20.01.2022.

44. It is now the contention of the Ld. Counsel for the Applicant that the money may be permitted to be deposited with the Registry of this Hon'ble Tribunal inspite of depositing the money with the Respondent bank as the Applicant has a dispute over the rate of interest charged by the bank.

45. The Ld. Counsel for the Respondent Bank contended that the Applicant having obtained an order at his consent to deposit the money with the bank, the filing of present petition itself is nothing but misusing the judicial mechanism wherein, this Hon'ble Tribunal 28SA 668/2021 & RA 02/2022

consumed a valuable time in passing the order and hence, this Application is liable to be dismissed with costs.

46. This Tribunal having perused the Affidavit and Petition and the counter filed by the bank and equally having heard the arguments of the parties is the considered view that the Review Petition filed by the Applicant on 18.01.2022 wherein, the Applicant was directed to deposit a sum of Rs. 18,50,000/- with the Respondent Bank by due date on 19.01.2022 and having obtained an order of stay for the proposed auction sale scheduled to be held on 30.12.2021 and the non-compliance of the said order is nothing but a tactics on the part of the Applicant one or in other way to prevent the bank in proceeding under the SARFAESI Act so as to recover its dues and hence, this Review Application is liable to be dismissed at threshold without any merit.

47. In the result, this SA No.668/2021 & RA No.02 of 2022 stands dismissed. The parties shall suffer the respective costs.

A copy of the order be communicated to all the parties concerned by the Registry of this Tribunal.

Dictated to my PA directly on the Computer, corrected and pronounced by me in the Open Tribunal on this the 05^th Day of January, 2023).

**[M. P. BALASUBRAMANIAN]** **PRESIDING OFFICER**