SOUTH INDIAN BANK vs PRD Mini Nidhi Ltd on 28 October 2024

ORDER

1. This Appeal is filed challenging the Order dated 03.01.2024 passed by Learned Presiding Officer, DRT-II, Ernakulam in IA 3067/2023 in SA 474/2023.

2. Interim Application IA 3067/2023 was filed by Respondents herein seeking stay of all further proceedings pursuant to Annexure-VI Notice issued by the Advocate Commissioner appointed by the CJM, Pathanamthitta.

3. Learned Counsel for Appellant Bank submitted that Appellant Bank has followed Rule 3 of the Security Interest (Enforcement) Rules, 2002, (hereinafter referred to as Enforcement Rules, 2002) in strict compliance, in serving Section 13 (2) of SARFAESI Act, 2002, notice to Respondents through registered post with acknowledgement due, and when it was returned because of non-service, paper publication was effected; thus, Notice was served as mandated in Rule 3 of Enforcement Rules, 2002. Despite of the fact of compliance of mandated service of Notice, Learned Presiding Officer has ordered stay of all further proceeding on the ground that Respondent Nos. 2 to 4 herein were in jail custody during the relevant period, and there was no proper service. It is further submitted that Bank was not aware of the fact that Respondent Nos. 2 to 4 were lodged in Jail. Respondents were served as mandated by Rule 3 of Enforcement Rules, 2002, and in the said circumstance, grant of stay in IA is not correct. Hence, this Appeal.

4. In response to this, Learned Counsel for Respondents submitted that, Respondents were remanded to judicial custody on 09.11.2022, and they were released on bail only on 02.08.2023. Respondents were not aware of the fact of service of Notice through registered post or through newspaper publication or affixture. Respondents were not served notice as required under law. Therefore, Tribunal below has rightly granted stay.

5. Considered the rival submissions. Certain dates are relevant in this case. As seen from para 4 of impugned Order, it is recorded that the Respondent Nos. 2 to 4 were remanded to judicial custody on 09.11.2022, and they were released on bail only on 02.08.2023. This fact is not disputed by Learned Counsel for Appellant Bank.

6. Admittedly, Demand Notice under Section 13(2) of SARFAESI Act, 2002, was issued on 14.12.2022, followed by its publication on 30.12.2022 and affixture on 29.12.2022, and Possession Notice was issued on 02.03.2023, followed by its publication on 02.03.2023 and affixture on 02.03.2023. It is pertinent to note that, during this period, Respondent Nos. 2 to 4 were in judicial custody. It is true that Rule 3 of Enforcement Rules, 2002, mandates service by registered post with acknowledgement due, or by Speed Post or by courier or by any other means of transmission of documents like fax message or electronic mail service; In case of non service through these means, service shall be effected by affixing Demand Notice on the outer door or some other conspicuous part of the house or building in which the Borrower or his agent ordinarily resides or carries on business or personally works for gain and also by publishing the contents of the demand notice in two leading newspapers, one in vernacular language, having sufficient circulation in that locality.

7. No doubt, Appellant Bank has followed all these procedures without fail. But, the point to be considered is whether these steps are sufficient in case of Borrowers, who were lodged in Jail. This Tribunal is of the considered view that these measures are not sufficient. The scope of Rule 3 of Enforcement Rules, 2002, is that, there must be proper and effective service of Notice to Borrowers putting them on notice of the measures taken by the Bank. What is use of sending Notice by Registered Post or by effecting service by affixture or publishing in newspapers, when Borrowers are lodged in Jail. They may not be aware of Notice taken by

Registered Post and effecting of service by affixture and newspaper publication by Bank.

8. Further, in ITA No. 77/2022, in the case of Principal Commissioner of Income Tax Vs. Narayan Kumar Khaitan, dated 14.02.2023, before Hon’ble High Court of Orissa at Cuttack, is a case where the Principal Commissioner of Income Tax (PCIT) was informed by the staff of the Assessee that the Assessee was in judicial custody. Instead of directing notice to be issued to the Assessee through the Superintendent of Jail, the PCIT treated the appearance of one Shri Uttam Kumar, a staff, as sufficient service of notice on the Assessee in terms of Section 292 BB of the Income Tax Act, Hon’ble High held that, service on the Assessee was not properly effected, and ultimately dismissed the Appeal filed by PCIT.

9. Here in this case, the material clearly indicates that Respondent Nos. 2 to 4 were lodged in Jail when the Notices were sought to be served. Appellant Bank had not taken any steps to verify whether Respondent Nos. 2 to 4 were residing in the address, to which the Notice had been taken. Despite non-service of Notice through the Registered Post, Authorised Officer of the Bank, proceeded to effect service by other modes such as, affixture and newspaper publication.

10. Therefore, this Tribunal is of the view that, Appellant Bank should have made a little more effort in finding the whereabouts of Borrowers namely Respondent Nos. 2 to 4, and then, should have taken steps by serving Notice through the Jail Superintendent, or by serving a copy of paper publication through the Jail Superintendent. It is obvious that these steps have not been taken by Appellant Bank. In view of above judgement of Hon’ble High Court of Orissa, this Tribunal is of the view that the mode of service followed by Appellant Bank is not proper, and it is not a sufficient service as contemplated under the Enforcement Rules, 2002.

11. For the above reasons, it is held that there are no grounds to interfere with the well reasoned Order passed by Learned Presiding Officer, DRT-II, Ernakulam, and the Appeal is devoid of merits and is liable to be dismissed and dismissed accordingly. As main SA is still pending, I deem it appropriate to direct the Tribunal below to decide the main SA, on merits, in accordance with law, as expeditiously as possible.

12. In the result, the Appeal in MA (SA): 8/2024 is dismissed. Both parties shall bear their own costs. All pending IAs, if any, stand closed.

[Dictated to Athistamani, PS, in open court, transcribed by her, corrected and signed by me this 28th of October, 2024]

[Justice G. Chandrasekharan] CHAIRPERSON