M/s 35 Foline Private Limited vs SOUTH INDIAN BANK on 2 November 2026

ORDER

1. This Appeal is filed against the order of the Learned Presiding Officer, DRT-I, Bengaluru passed in SA No.290/2023 dated 22.5.2024 under Section 18 of the SARFAESI Act.

2. Appellants filed SA No.290/2023 to set aside the Tender- cum-Sale Notice dated 02.06.2023 issued by the 1st Respondent Bank in respect of the schedule mentioned property as arbitrary, illegal and injustice and for granting other reliefs as may be deemed necessary to be granted by the Tribunal in the interest of justice and equity.

3. Brief facts leading to filing of this SA are, as follows:

3.1 First Appellant is a company involved in the business of wholesale distributor of Tobacco, food and personal care products to Indian Tobacco Company Limited (ITC Ltd.). Second appellant is the Managing Director of the first Appellant company. Third Appellant is the mother and the fourth Appellant is the father of the second Appellant. First Appellant was recognized as “Gold Whole Sale Distributor” by ITC Limited and had also been awarded “Silver Wholesale Distributor” amongst the wholesale distributors in India for three consecutive years. Appellant availed loan facilities from the first Respondent Bank and the Respondent Bank approved a total loan to the tune of Rs.13,39,88,214/-. Appellants offered three properties as security for the loan and executed mortgage in respect of the schedule mentioned properties. Initially Appellants availed loan from Federal Bank, Tavarekere Branch and that was subsequently taken over by the first Respondent Bank in the year 2013-2014.

3.2 ITC Ltd. has not sanctioned the additional Cigarette Business worth Rs.12.00 crores and that adversely affected the growth of the first Appellant company. It also suffered substantial loss in the business. Effect of de-monitisation and introduction of GST added to the setback in the business of the first Appellant. Thus, first Appellant was constrained to avail long term loan of Rs.2.00 crores and ODCC Limit of Rs.8.00 cores. In the year 2020, the amount availed as loan by the first Appellant mounted to Rs.10.00 crores due to COVID-19 pandemic situation and subsequent lockdown, which caused great hardship to first Appellant’s business. Therefore, first Appellant availed Guarantee Emergency Credit Loan (GECL) of Rs.2.00 crores from the first Respondent Bank to repay the moratorium loan amount. Appellant had also taken ECLGS to the tune of Rs.1.00 crore from the first Respondent Bank.

3.3 First Appellant’s business suffered huge loss to the tune of Rs.7.23 crores in the year 2021-2022. ITC stopped supplying stock and ultimately removed first Appellant as a wholesale distributor of ITC Ltd. Outstanding receivables by the Appellants from various retailers, which were around Rs.8.69 crores could not be recovered due to COVID 19 pandemic situation. Meanwhile, 1st Respondent Bank sent a notice dated 15.06.2022 informing that first Appellant’s account was classified as NPA. Then, on 29.08.2022, Respondent issued a Demand Notice claiming a sum of Rs.13,60,57,349/-. First Appellant offered OTS proposal to the 1st Respondent Bank vide its letter dated 15.10.2022, but, it was rejected by the Respondent Bank vide letter dated 31.10.2022. Bank issued Possession Notice dated 13.02.2022 under Section 13(4) of the SARFAESI Act, 2002. Appellants paid a sum of Rs.9.00 crores approximately towards interest. On 17.01.2023, 1st Appellant submitted another OTS proposal for Rs.9.00 crores. That was rejected by the Respondent Bank.

3.4 Respondent Bank issued guarantee invocation letter dated 04.02.2023 asking the second Appellant to pay the loan amount along with interest. Fourth Appellant sent a letter dated 22.02.2023 proposing to pay Rs.9.00 crores within a period of 180 days. Bank sent a letter dated 10.03.2023 asking the said sum of Rs.9.00 crores to be paid on or before 30.06.2023 with certain conditions. With much difficulty, Appellants paid an amount of Rs.90.00 lakhs. However, due to Karnataka Assembly Elections, 2023, real estate market in the state of Karnataka was completely affected. Appellants could not sell the property and make payments as per the OTS proposal. Without minding the difficulties of the Appellants, Bank proceeded to issue tender cum auction sale notice dated 22.05.2023. That was cancelled by the Respondent and then a fresh tender cum sale notice dated 02.06.2023 was issued for selling the mortgaged property on 10.07.2023. This SA has been filed challenging the said Sale Notice on the following grounds:

a) Payments made by the Appellants towards the loan account and through OTS were not given proper credit.

b) Effects of demonetization, GST implementation, COVID pandemic situation and its adverse effect on the business of the Appellants

c) Removal of the first Appellant as the wholesale distributor of ITC Ltd.

d) Difficulties in mobilizing funds, etc.

3.5 It is pertinent to note here that there is absolutely no grounds/pleas are taken with regard to the defects, if any, in the measures taken under the SARFAESI Act, 2002, especially, in issuing tender cum sale notice dated 02.06.2023 under Section 13(4) of the SARFAESI Act, 2002.

3.6 This SA was contested by the 1st Respondent Bank, justifying the measures taken by the Bank by filing counter to the SARFAESI Application. Learned Presiding Officer, after considering the records produced and the rival submissions, dismissed the SA on the ground that Appellants did not establish any reason or otherwise made a case that they were deprived of any of their rights guaranteed in the Constitution or under any other law for the time being in force, by way of measure taken under Section 13(4) of the SARFAESI Act, and therefore, the Appellants do not come under the definition of aggrieved person to make an Application under Section 17(1) of the SARFAESI act. As against the order of dismissal, this Appeal is filed by the Appellants.

4. Learned Senior Counsel for the Appellants submitted that SA 290/2023 has been filed to set aside the auction sale notice dated 02.06.2023 issued by the 1st Respondent Bank. SARFAESI Act, 2002 gives enormous powers to banks/financial institutions whereby banks/financial institutions can take possession of the secured asset and sell the secured asset in SARFAESI auction sale, if the borrower/guarantor defaulted in repaying the loan amount, once the loan account has been classified as Non-Performing Asset. When such omnipotent power is exercised by the banks/financial institutions, it is expected that banks/financial institutions to take measures as required under the SARFAESI Act and the Rules made thereunder, without committing any acts of commissions and omissions in enforcement. It is not required for the one, who challenges the SARFAESI measures, be it a borrower or a guarantor, to raise specific plea as to the defects in the measures taken by the Bank.

4.1 Section 17 of the SARFAESI Act and Section 22 of RDB Act have to be read together. In the celebrated decision in re, Mardia Chemicals Vs. Union of India, it is clarified by Hon’ble Supreme Court of India that only measure taken under Section 13 (4) of the SARFAESI Act can be challenged. First Respondent Bank stated that the property had been sold on complying the provisions of the SARFAESI Act and produced valuation report in support of its submission along with other documents. It is required that the valuation report produced is correct and legal and it must be in terms of the SARFAESI Act and the Rules made thereunder. General proposition that no amount of evidence can be allowed without pleading is not applicable to SARFAESI proceedings and de hors the pleading, the bank is mandated to prove that the measures are taken exactly as required under the SARFAESI Act. There is no specific ground raised in the Securitisation Application relating to the measures taken by the bank and the prayer made in the SARFAESI Application. In the Appeal, on an Application filed, additional grounds are permitted to be raised. Therefore, merely because the grounds raised as additional grounds were not raised in the SARFAESI application at the time of filing, grounds touching upon the measures taken and prayer cannot be ignored, without proper consideration.

4.2 It is further submitted by the Learned Senior Counsel for the Appellants that Learned Presiding Officer found that the Appellants are not the aggrieved persons. This finding of the Learned Presiding Officer is absolutely wrong. Appellants are the borrowers and when their mortgaged property was brought for sale, Appellants are aggrieved parties and are entitled to challenge the measures taken, especially, when the measures are not taken in accordance with the provisions of the SARFAESI Act. The finding recorded by the Learned Presiding Officer is against the provisions under Section 17 (3) of the SARFAESI Act.

4.3 Reasons attributed for committing default are that 1st Appellant company was removed from the wholesale distributor of ITC Ltd, impact of demonitisation, introduction of GST and COVID pandemic situation. Therefore, the business of the 1st Appellant had suffered great loss and that resulted in committing default. First Appellant is a MSME Unit and notification of RBI guidelines relating to revival of MSME units had not been considered by the 1st Respondent Bank. First Respondent Bank had not explored the possibility of Corrective Action Plan (CAP) under MSME Act, which should have been mandatorily explored, as per the decision of Hon’ble Supreme Court of India in re, M/s Pro Knits Vs. The Board of Directors of Canara Bank and others reported in (2024) 8 SCR 140. The guidelines of RBI are mandatory in nature. Had those guidelines were followed, 1st Appellant company’s account would not have been classified as NPA.

4.4 The property was valued by a Company, which is not an approved valuer under Wealth Tax Act. Rule 8(5) of Security Interest (Enforcement) Rules, requires that the

Authorised Officer shall obtain valuation of the property from an approved valuer and in consultation with the secured creditor and fix the reserve price of the property. Rule 2(d) of SIE Rules defines ‘approved valuer’ as a person registered as a valuer under Section 34AB of the Wealth Tax Act and approved by the Board of Directors or Board of Trustees of the secured Creditor, as the case may be.

4.5 In the case before hand, valuation report was given by M/s. Adroit Technical Services Pvt. Ltd. It is a company, and a company cannot be the valuer. It is not an approved valuer under the Wealth Tax Act, 1957. Appellants produced information under RTI Act, in support of Appellants’ claim that the valuation report given by the said M/s. Adroit Technical Services Pvt. Ltd. is not in conformity with Rule 8(5) read with Rule 2(d) of the SIE Rules, 2002. When the foundational issue of valuation suffers from this illegality, reserve price fixed on the basis of this valuation report and the sale held are bound to suffer and are liable to be set aside. The issue of valuation and competency of the valuer is now raised as an additional ground. Property was undervalued and sold for insufficient price. Thus, Learned Senior Counsel for the Appellants prayed to set aside the order of the Learned Presiding Officer and for allowing the Appeal.

4.6 In support of his submissions, the Learned Senior Counsel for the Appellants relied on the following decisions. I. The decision in M. R. Vasumathi Vs. Authorised Officer and Ors., reported in 2026 SCC OnLine SC 1103, is relied for the proposition that “while it is trite that the rights of an auction purchaser and the sanctity of a confirmed sale ordinarily merit due protection, such protection is by no means absolute. It must yield where the very process engendering the sale is demonstrated to be legally infirm or to be incongruous with the statutory framework. The object of proceedings under the SARFAESI Act is not the mere culmination of a sale in a mechanical manner, but the lawful realisation of the secured asset through a process that is fair, transparent and strictly compliant with the prescribed rules.

II. The decision in Om Sakthi Sekar Vs. V. Sukumar and Ors., reported in (2026) 265 Comp Cas 689, is relied for the proposition that “where credible issues are raised regarding the adequacy of valuation or the fairness of the process leading to the fixation of the reserve price, the supervisory jurisdiction of the Court may be invoked to ensure that the recovery proceedings have been conducted in a manner that secures the best possible value of the property.”

III. The decision in A.K. Karthikeyan Vs. Authorised Officer, reported in 2025 SCC OnLine Mad 3785, is relied for the proposition that “the scheme for MSME has fixed a duty on the banks to constitute committee, while adhering to formulate a scheme for revival, shall incorporate clause for repayment of loan. While the matter being so, blaming the MSME Unit that the claim is belated one etc., cannot be accepted.”

5. Learned Senior Counsel for the 1st Respondent Bank submitted that Securitisation Application mainly focused only on availment of loan, loss suffered by the 1st Appellant company and on various grounds like demonitisation, introduction of

GST, COVID 19 pandemic situation, removal of 1st Appellant from the wholesale distributor of ITC Ltd., etc. There is absolutely no pleading with regard to the SARFAESI measures taken, and the defects, if any, noted in the SARFAESI measures starting from issuance of Section 13(2) Demand Notice, Section 13(4) Possession Notice and the sale notice issued under the SARFAESI Act, 2002. The sale notice contains the details of the property required to be sold for recovery of bank’s dues, reserve price fixed and other necessary details. Nothing is whispered about particulars given in the sale notice, whether they are right or wrong. In the counter filed by the Bank before the Tribunal below, 1st Respondent Bank mentioned about obtaining valuation report from M/s. Adroit Technical Services Pvt. Ltd. Even then, the competency of the valuer was not questioned before the Tribunal below. There is absolutely no foundational pleading made in the SARFAESI application to challenge the measures taken, especially, the sale measures taken. Pleadings, especially, foundational pleadings are absolutely necessary as per law of pleadings and as per natural justice. Opposite party should be informed about the grounds of challenge taken in the SARFAESI application or for that matter in whatever litigation initiated. Without proper pleading, the parties would be in disadvantageous position to make effective and proper defence. There is not even a glimmer of hint especially about the competency of the valuer in the SARFAESI Application. New pleading cannot be entertained to plug the loophole in the original pleadings.

5.1 There is no dispute with regard to the borrowal and the default committed. Appellants admitted in the SARFAESI Application about the borrowal of loan and creation of mortgage over the schedule properties. On default, account was classified as NPA and Section 13(2) Demand Notice was given. Appellants received the said notice and it is admitted in the SARFAESI Application. No objection/reply was sent to Section 13(2) Demand Notice. Though the Appellants submitted that certain OTS proposals were submitted, those proposals had to be rejected by the Bank for its insufficiency of offer. One OTS proposal for Rs.9.00 crores, though accepted by the 1st Respondent Bank, Appellants failed to honour the OTS

payment, as agreed. Appellants admitted receipt of Possession Notice and sale notice. In the absence of proper and effective pleading to challenge the measures taken under the SARFAESI Act, Learned Presiding Officer held that Appellants are not the aggrieved parties, and this finding cannot be questioned by the Appellants. Benefits of MSME had to be claimed in the reply given to Section 13(2) Demand Notice and that had not been done in this case. One of the directors of M/s. Adroit Technical Services Pvt. Ltd. is an approved valuer. He approved the valuation report, and therefore, valuation report of M/s. Adroit Technical Services Pvt. Ltd. cannot be faulted. Appellants filed valuation report only after the sale to show a boosted price. Comparatively, Bank’s valuer adopted right method for arriving at the valuation of the property. Irregularity in obtaining of the valuation report cannot be a ground for setting aside the sale measure. Thus, he prayed for dismissing the Appeal.

5.2 In support of his submissions, the Learned Senior Counsel for the 1st Respondent Bank relied on the following decisions:-

I. The decision in State of Maharashtra Vs. Hindustan Construction Company Limited, reported in 2010 4SCC 518, is relied for the proposition that new grounds cannot be raised in the first time in the Appeal without making a foundation in the trial court. It is observed that “………grounds sought to be added in the memorandum of arbitration appeal by way of amendment are absolutely new grounds for which there is no foundation in the application for setting aside the award. Obviously, such new grounds containing new material/facts could not have been introduced for the first time in an appeal when admittedly these grounds were not originally raised in the arbitration petition for setting aside the award.”

II. The decision in Vastu Invest & Holdings Pvt. Ltd. Vs. Gujarat Lease Financing Ltd., reported in 2001 (2) Mh.L.J., is relied for the proposition that , “a ground not initially raised in the petition to challenge the award could not be permitted to be subsequently raised by an amendment, if the application for amendment itself was beyond the period of limitation fixed for filing the petition, challenging the award.”

III. The decision in Zee Sports Ltd Vs. Numbus Media Ptd. Ltd. reported in 2017 SCC OnLine Bom 10096, is relied for the proposition that “merely because a general ground that an arbitral tribunal has not followed the mandate of Indian Law, with no further elaboration, a contention cannot be advanced regarding inherent lack of jurisdiction by way of an amendment stating that it is an amplification……” IV. The decision in Shri Shri Swami Samarth Construction & Finance Solution & Anr. Vs. The Board of Directors of NKGSB Co-op. Bank Ltd. & Ors. reported in 2025 INSC 908, is relied for the proposition that “though while stressing that the terms of the framework under the MSME need to be followed by the lending banks/secured creditors before the account of an MSME is classified as NPA, this decision also lays stress on the obligation of the MSMEs by holding that “it would be equally incumbent on the part of the MSMEs concerned to be vigilant enough to follow the process laid down under the said framework, and bring to the notice of the Banks concerned, by producing authenticated and verifiable documents/material to show its eligibility to get the benefit of the said framework”. It was cautioned that “if such an enterprise allows the entire process for enforcement of security interest under the SARFAESI Act to be over, or it having challenged such action of the bank/creditor concerned in the court of law/tribunal and having failed, such an Enterprise could not be permitted to misuse the process of law for thwarting the actions taken under the SARFAESI Act by raising the plea of being an MSME at a belated stage”.

V. The decision in Celir LLP Vs. Sumati Prasad Bafna & Ors., reported in INSC 978/2024, is relied for the proposition that “Any Sale by auction or other public procurement methods, once already confirmed or concluded ought not to be set-aside or interfered with lightly except on grounds that go to the core of such sale process, such as either being collusive, fraudulent or vitiated by inadequate pricing or underbidding. Mere irregularity or deviation from a rule which does not have any fundamental procedural error, does not take away the foundation of authority for such proceeding. In such cases, courts in particular should be mindful to refrain entertaining any ground for challenging an auction which either could have been taken earlier before the sale was conducted and confirmed or where no substantial injury has been caused on account of such irregularity.”

VI. For the same proposition, the decision in Sanjay Sharma Vs. Kotak Mahindra Bank Ltd. & Ors., in SLP (C ) No. 330/2017, is relied.

6. Learned Counsel for the Auction Purchaser mostly sailed with the submissions of Learned Senior Counsel for the 1st Respondent Bank and reiterated that there is absolutely no pleading, touching upon the measures taken and its validity. Auction Purchaser produced records to show that valuation was rightly done. When there is no pleading with regard to the competency of the valuer, undervaluation and sale for insufficient price in the SARFAESI application, these issues cannot be raised in this Appeal. Confirmed sale cannot be set aside unless there is grave irregularity, collusion, fraud,

undervaluation and insufficient pricing. Appellants are not able to make out any of these grounds, and therefore, prayed for dismissal of this Appeal.

6.1 In support of his submissions Learned Counsel for the Auction Purchaser relied on the decision in ARCE Polymers Private Limited Vs. Alphine Pharmaceuticals Private Limited and Ors. reported in (2022) 2 SCC 221 for the proposition that, “…the law recognises that the lender knows its interests and how to secure best value of the property given the fact that the mortgaged property had to be sold for recovery of the debts due and payable to the Bank.”

7. Considered the rival submissions and perused the records.

8. SA 290/2023 has been filed to set aside the tender cum auction sale notice dated 02.06.2023 issued by the 1st Respondent Bank. As already stated, Appellants pleaded in the Securitisaton Application, i) the payments made towards the loan account and through OTS were not given proper credit ii)

effects of demonetization, GST implementation, COVID-19 pandemic situation and its adverse effect on the business of the Appellants iii) removal of the 1st Appellant as a wholesale distributor of ITC Ltd. and, iv) difficulties experienced in mobilization of funds in paying the loan amount/OTS amounts. There is absolutely no ground/plea raised with regard to the defects, if any, noticed in the measures taken under SARFEASI Act, 2002, starting from issuance of the Demand Notice, Possession Notice and Sale Notice.

9. It is the submission of the Learned Senior Counsel for the Appellants that irrespective of the plea taken or not taken in the SARFAESI Application impugning the Sale Notice, it is for the Respondent Bank to establish that the measures under the SARFAESI Act, had been taken, especially, the issuance of Sale Notice had been done, by following the mandatory requirements of the SARFAESI Act and Rules made thereunder. In the Appeal, Appellants filed an Application for raising additional grounds in IA 341/2026 and it was allowed. Appellants were permitted to challenge the valuation report produced by the 1st

Respondent, on the basis of which the reserve price was fixed and sale was held. It is also submitted that the valuation reports filed by the Appellants and 1st Respondent show that the property was grossly undervalued by the 1st Respondent’s valuer, and based on that, the reserve price was fixed, and the property was sold for insufficient price.

10. Another ground taken is that, the 1st Appellant is an MSME Unit entitled for Corrective Action Plan under MSME Act, which mandatorily required to be explored by the Bank, but failed to explore it. As recorded earlier, the Learned Senior Counsel for the 1st Respondent and 2nd Respondent seriously opposed these grounds stating that unless foundational pleadings are laid out, these issues raised for the first time, cannot be considered.

11. The grounds now raised centered around the validity of the valuation report filed by the 1st Respondent, and entitlement of benefits of MSME Unit, thus, it is not required to consider other aspects like classification of the account as NPA, issuance of Demand Notice, validity of issuance of Demand

Notice, Possession Notice and Sale Notice under Sections 13(2) and 13(4) of the SARFAESI Act, 2002. In IA No. 341/2026, the Appellants sought to produce the following documents as additional documents :-

“1. RTI Reply from the Income Tax Officer, (HQ) & CPIO, O/o CCIT-1, dated 27.10.2025

2. RTI Reply from the Income Tax Officer, (HQ) & CPIO, O/o CCIT-1, dated 24.11.2025

3. RTI Reply from the Income Tax Officer, (HQ) & CPIO, O/o CCIT-1, dated 01.01.2026

4. List of Valuers approved u/s 34AB of Wealth Tax Act 1957 by Chief Commissioner of Income Tax, Bangalore-2, Bangalore as found on the official website”, to show that the valuation certificate issued by the 1st Respondent’s valuer, M/s. Adroit Technical Services Pvt. Ltd., is not legal for the reason that this company is not an approved valuer under Section 34 AB of the Wealth Tax Act, 1957, and that only an individual person can be an approved valuer, and not an entity. List of the approved valuers downloaded from the department’s website has also been produced. In the said list, the name of M/s. Adroit Technical Services Pvt. Ltd. does not figure. Since these documents are necessary for the adjudication of this Appeal, IA No.341/2026 was allowed and these documents are received in evidence.

12. Perusal of these documents shows that, on 27.10.2025, the office of the Chief Commissioner of Income Tax, passed an order under Section 7(1) of the RTI Act, 2005, on the request made for the information on M/s Adroit Technical Services Pvt. Ltd., in which the following questions have been raised in the RTI Application:-

i) Whether they are in the list of empanelled Evaluators under the Wealth Tax Act?

ii) Who are there authorized signatories and there signatures?

iii) Were they empanelled during the period February 2023?

These questions were answered as follows:-

“The application for registration as a valuer under Section 34AB of the Wealth Tax Act, 1957, should be applied by a person and not in the name of an entity as prescribed under Section 34AC of the Wealth Tax Act, 1957.”.

12.1 By order dated 24.11.2025, the same office passed an order when a query was made for providing the list of valuers registered under Section 34AB of the Wealth Tax Act, 1957 from 2022 to till date. It was answered as follows:-

“The list of valuers registered under 34AB of the Wealth Tax Act, 1957 is available in the website https://incometaxkarnatakagoa.gov.in/circular.”

The downloaded copy is also enclosed from financial year 2015- 2016 to 2020-2021.

13. By order dated 01.01.2026, the office of the Chief Commissioner of Income Tax, Bengaluru, responded to the queries to the Applicant as follows:- Information sought by the applicant Reply

1. Whether the signed person is authorised appraiser? No, as per Wealth Tax Act,

2. Whether the person who has signed the valuation report is approved valuer within the meaning of u/s 34AB of Wealth Tax Act, 1957 for the purpose of valuation of immovable properties? The application for registration as a valuer u/s 34AB of the Wealth Tax Act, 1957 should be applied by an Individual person.

3. Whether the signed person is appointed for the specific period of valuation, if so please give the period and date?

NA

4. Whether Adroit Technical Services Pvt. Ltd. is an approved valuer u/s 34AB of Wealth Tax Act, 1957, if so period of appointment? NA

14. Appellants have also produced the valuation report given by M/s. Adroit Technical Services Pvt. Ltd. and the valuation report given by Mr. S. Ramesh, the approved valuer. It is no doubt that the valuation report obtained by the 1st Respondent Bank was issued by M/s. Adroit Technical Services Pvt. Ltd. Though the Wealth Tax Act 1957, is repealed, Rule 246 (4) of the Income Tax Rule 2026, which came into force from 01.04.2026, states that the registered valuers under Wealth Tax Act, 1957, holding a valid registration certificate as on 31.03.2026, will continue to be a registered valuer under Section 514. But, they are required to update their details by filing an application as referred in Sub-rule (1), by 30.09.2026. Upon filing of such application, registration will be granted by the concerned authority. The relevant portion of the Rule is extracted hereunder:- “Rule 246(4) dictates that individuals already registered as valuers under the Wealth-tax Act, 1957, with a valid certificate on March 31, 2026, will continue to be recognized as registered valuers under Section 514. However, they must update their details by submitting an application by September 30, 2026”.

Therefore, the report of the valuers appointed under Section 34AB of the Wealth Tax Act 1957, is still relevant irrespective of the repealing of the Wealth Tax Act, 1957.

15. Rule 8(5) of the Security Interest (Enforcement) Rules, 2002, requires that before the sale of the immovable property, the Authorized Officer shall obtain valuation of the property from an approved valuer. The term “approved valuer” is defined in Rule 2 (d) of the SIE Rules, 2002. It reads as follows:-

2. Definitions

(a) …… …….

(d) "approved valuer" means a person registered as a valuer under section 34AB of the Wealth-tax Act, 1957, and approved by the Board of Directors or Board of Trustees of the secured creditor, as the case may be;”

This definition makes it clear that only an approved valuer registered under Section 34AB of the Wealth-tax Act, 1957, is empowered to value and give valuation report in respect of an immovable property sought to be sold under SARAFAESI Act, 2002.

16. As seen from the RTI replies referred above and the list of approved valuers that, M/s. Adroit Technical Services Pvt. Ltd., is not an approved valuer registered under Section 34 AB of the Wealth Tax Act, 1957. The question now arises is what is the validity of the valuation report given by M/s. Adroit Technical Services Pvt. Ltd., especially, in this case, where there is no plea taken with regard to the measures taken under SARFAESI Act, 2002, for sale of the secured asset and the valuation, valuation report in the Securitisation Application?

17. The 1st Respondent also produced certain documents as additional documents, as follows, in IA 545/2026 and that was allowed:-

S. No. DATE DESCRIPTION OF DOCUMETS

15.10.2022 OTS Letter by Appellant to first Respondent

22.02.2023 OTS Letter by Appellant to first Respondent

18.06.2020 Board Resolution of M/s. Adroit Technical Services Pvt. Ltd

25.03.2026 Affidavit of Alok Kumar Majumdar representing Adroit Technical Services Pvt. Ltd

28.04.2022 Minutes of Review Meeting Convened by Petitioner/Ist Respondent Bank

The 1st Respondent Bank relied on the Board Resolution dated 18.06.2020 of M/s. Adroit Technical Services Pvt. Ltd., to show that Mr. Anand Kumar B.K., one of the directors of the company, was authorized to do the acts detailed in the Board Resolution. This resolution is also relied to state that Mr. Alok Kumar Mazumder is one of the directors of M/s. Adroit Technical Services Pvt. Ltd., and he is an approved valuer under the Wealth Tax Act, 1957. An Affidavit is also filed to state that M/s. Adroit Technical Services Pvt. Ltd., is a company engaged in the activity of valuation. Many of the key persons, Board of Directors and signatories are registered under Section 34AB of Wealth Tax, IBBI and Royal Institution of Chartered Surveyors. Mr. Alok Kumar Mazumder was involved in the affairs of the company and he is a registered valuer under Section 34AB of the Wealth Tax Act, 1957, for the class of ‘immovable properties’. Valuation report concerning the account of the Appellant was confirmed and approved by Mr. Alok Kumar Mazumder.

18. The communication from the Government of India, Ministry of Finance, Department of Revenue, Office of the Chief Commissioner of Income Tax, Kolkata, Nos. CCIT -4/KOL/Reg. of Valuer-34AB/N64/2016-17/4284, dated 30.01.2017, is produced to show that Alok Kumar Mazumder was accorded as a valuer under Section 34 AB of the Wealth Tax Act, 1957, for the class of the assets “Immovable Properties”. His registration number in the Register of valuers maintained in the office of the Chief Commissioner of Income Tax, Kolkata is, W.B/CCIT- 4/Kol/55/2016-17/Registration of Valuer/Alok Kumar Mazumder. This Tribunal, on verification of the concerned website, found that, Mr. Alok Kumar Mazumder’s name is found in Serial No. 55, as registered valuer under Section 34 AB of the Wealth Tax Act, 1957.

19. Whether the valuation report given by M/s. Adroit Technical Services Pvt. Ltd. can be accepted, when one of its directors is a registered valuer under the Wealth Tax Act, 1957? Before deciding this issue, it is required to find out the valuations adopted by the valuers of the Appellants and 1st Respondent Bank.

20. The valuation report of M/s. Adroit Technical Services Pvt. Ltd. dated 08.02.2023 shows that the item numbers 1 and 2 of the properties, in the schedule to the Securitisation Application, are vacant plots, bearing Plot Nos.12 and 11 in "Prospero Villa", BBMP Ward No. 7 Byatarayanapura Municipal Council under Sy. no. 117/2 of Amruthahalli Village, Yelahanka Hobli, Bangalore North Taluk. Both the plots valued together. The total extent is 6062 sq. ft. As per the report, the prevailing market value was Rs.7,500 to Rs.8,500 per sq. ft. The guideline rate obtained from the Registrar’s office was Rs.3,716/- per sq. ft. The value adopted by the valuer was Rs.5,500 per sq. ft. The estimated value of the land of 6062 sq. ft. at Rs.5500/- per sq. ft. was Rs.3,33,41,000/-. The item No.3 property is measuring 219.60 sq. meter.(2364 sq. ft.) of land with building. The extent of the plot is 2364 sq. ft. The prevailing market price is Rs.14000 to Rs.15000. The guideline value was Rs.5900 per sq. ft. Adopted valuation was

Rs.16,000/- per sq. ft. Thus, the land was valued at Rs.16,000/- per sq. ft. for 2364 sq. ft. at Rs.3,78,24,000/-.

20.1 This land has building with ground plus two floors. The entire building was valued at Rs.46,81,600/- along with that Rs.4,00,000/- was given for amenities. The total value of the land and building was Rs.4,29,05,600/-.

20.2 The Appellant’s valuation report dated 17.06.2024 shows that it was valued by Mr. S. Ramesh, the approved valuer of State Bank of India for Income Tax and Wealth Tax. The Appellant’s valuer valued the Plot Nos. 11 and 12 separately. As per the valuation report, plot No. 12 measures 2517.32 sq. ft. The prevailing market price was Rs.10,000/- to Rs.11,000/- per sq. ft. The guideline valuation was Rs.4090/- per sq. ft. The adopted valuation as Rs.10,000/- per sq. ft. Thus, the plot No. 12 was valued at Rs.2,51,73,200/-.

20.3 The extent of plot No. 11 given is 3400 sq. ft. The same prevailing market value and guideline value was given. Adopted value is taken at Rs.10,000/- per sq. ft. for 3,400 sq. ft. and the value of plot No.11, was fixed at Rs.3,40,00,000/-.

20.4 For plot No.3, the extent of area is 219.60 sq. meter (2363.77 sq. ft.). The prevailing market price was Rs.20,000/- to Rs.21,000/- per sq. ft. The guideline value was Rs.9,108 per sq. ft. The adopted rate of valuation is Rs.20,000/- per sq. ft. Thus, the land was valued at Rs.20,000/- per sq. ft. for 2,363.77 sq. ft. at Rs.4,72,75,488/-. The ground floor with two floor building was valued at Rs.38,64,000/- for building, Rs.75,000/- for miscellaneous and Rs.2,00,000/- for services. Total value of the land and building was valued at Rs.5,14,00,000/-.

21. The Learned Senior Counsel for Appellants submitted that a comparative study of the valuation reports given by the Appellants and the 1st Respondent shows that the 1st Respondent’s valuer has grossly undervalued the property. The 1st Respondent’s valuer is not an approved valuer under the

Wealth Tax Act, 1957, and therefore, the Appellants’ valuation report has to be accepted and adopted to decide the fact of undervaluation of the property.

22. The Learned Counsel for Respondent No.2 has also filed additional documents in IA 454/2026 to produce the Gazette notification to show the value of the properties. The Gazette notification of Government of Karnataka shows the land in ‘Prospero Villa’ is Rs.40 Lakhs per sq. meter, and the value of the land in HRBR layout is Rs.96,200/- per sq. meter. He supported the valuation of the 1st Respondent on the ground that the value adopted was above the of guideline value.

23. The perusal of the valuation reports of the 1st Respondent and the Appellants shows that the 1st Respondent’s valuer adopted the value of 5,500 per sq. ft. against the guideline value of Rs.3716 per sq. ft. for plot Nos.12 and 11. One square meter is equal to 10.764 sq. ft. Therefore, the guideline for one square meter is Rs.39,990.024 i.e. Rs.40,000/-. For the item No. 3, against the guideline value of Rs.5,900 per sq. ft., the valuer adopted the value of Rs.16,000/- per sq. ft. On the other hand, the Appellants’ valuer adopted the value of Rs.10,000/- per sq. ft., against the guideline value of 4,090/- per sq. ft., i.e. Rs. 44,000/- per sq. meter for item No. 1 and 2. For item number 3, the Appellants’ valuer adopted Rs.20,000 per sq. ft., against the guideline value of Rs.9,108 per sq. ft. which is Rs.98,000/- per sq. meter. When it comes to adopted value on the basis of prevailing market value, there is huge difference between the rate adopted by the 1st Respondent valuer and the Appellants’ valuer. Both the valuers have not produced any documentary evidence, like comparable sale deeds registered in the same locality at the relevant period of valuation. At least, in the 1st Respondent’s valuation report, there is a mention that two latest details/transactions with respect to adjacent properties in that areas were considered. But, those details are not indicated in the valuation report or filed along with the valuation report. In the valuation report filed by the Appellants, there is no indication at all as to whether any details or transactions were considered for arriving at the adopted value at Rs.10,000/- per sq. ft. and at Rs.20,000/- per sq. ft.

24. The sale notice was issued on 02.06.2023, 1st Respondent’s valuation report was obtained prior to the issuance of the sale notice, on the basis of inspection on 08.02.2023, whereas, Appellants’ valuation report was obtained subsequent to the disposal of the SA, on the basis of the inspection held on 16.06.2024. Therefore, the Appellants’ valuation report cannot be accepted and relied for determining the question of undervaluation. In the absence of any documentary evidence, it is difficult to determine as to whether the 1st Respondent’s valuation conform to the prevailing market value, however, the valuation above the guideline value suggests the best possible price was fixed in a distress sale. It is seen from the letter of the Appellants dated 15.10.2022 addressed to the 1st Respondent wherein the Appellants claim that the vacant plot pledged to the Bank has entrance dispute, and hence, it may not fetch any high price. Therefore, this Tribunal is of the view, out of two valuation reports of the 1st Respondent and

Appellants, the 1st Respondent’s valuation report can be accepted for determining the issue on valuation.

25. It is already held that the valuation report can be given only by an individual person and not by a company. However, in the case before hand, one of the directors, Mr. Alok Kumar Mazumder of M/s. Adroit Technical Services Pvt. Ltd., is an approved valuer under Section 34 AB of the Wealth Tax Act, 1957. Therefore, in the peculiar facts and circumstances of the case, where the Appellants have not made any specific plea in the Securitisation Application with regard to the measures taken under SARFAESI Act, 2002, especially, the issuances of Tender-cum-Sale Notice dated 02.06.2023, and that no effort had been taken for filing the valuation report before the Tribunal for challenging the valuation report given by M/s. Adroit Technical Services Pvt. Ltd., despite being informed about the valuation done by it in the Counter Affidavit, this Tribunal is of the view that, the report given by M/s. Adroit Technical Services Pvt. Ltd. can be accepted as an exceptional case.

26. The finding of the Learned Presiding Officer, DRT-I, Bengaluru, that the Appellants are not the aggrieved persons, is not correct, however, this finding had been recorded for lack of necessary pleadings. Though the Appellants are aggrieved persons, this Tribunal finds that, in the absence of challenge to the measures taken for sale of secured asset, and when there is no foundational pleadings are made, especially, with regard to the alleged undervaluation and valuation report, in the Securitisation Application, this Tribunal is of the view that, the Appellants cannot take advantage of the permission granted by this Tribunal for raising these grounds in this Appeal, as a basis for setting aside the order of Learned Presiding Officer, DRT-I, Bengaluru. When none of the earlier measures like classification of account as NPA, issuance of 13(2) Demand Notice and issuance of Possession Notice was challenged, and when there is no pleadings with regard to acts of commission, omission and defects in the sale notice issued, this Tribunal is of the view that the dismissal of SA 290/2023 is just and proper.

27. On the submission of the Learned Senior Counsel for the Appellants that the Appellants should have been extended the benefit of MSME Act, this Tribunal is of the view that though the application of the provisions of the MSME act is mandatory as per the decision of M/s. Pro Knits Vs. The Board of Directors of Canara Bank, reported in 2024 INSC 565, it would be incumbent on the part of the concerned MSMEs to produce authenticated and verifiable documents/any material for substantiating its claim of being MSME Unit, before the account is classified as NPA. If that is not done, and once the account is classified as NPA, the Bank i.e. the secured creditor, would be entitled to take recourse under Chapter III of the SARFAESI Act, 2002, for enforcement of security interest. Absolutely, there is no material produced to show that the Appellants have taken any steps to avail the benefits under MSME Act by producing authenticated and verifiable document/material. Therefore, the contention of the Learned Senior Counsel for the Appellants that the 1st Respondent should have explored the possible application of the MSME Act to the Appellants cannot be accepted.

28. In this view of the matter, the order of the Learned Presiding Officer, passed on 22.05.2024, in SA 290/2023 of DRT-I, Bengaluru, is confirmed. Consequently, the Appeal in RA (SA) 25/2025 is dismissed. Both the parties shall bear their own costs. All pending IAs, if any, stand closed.

[Dictated to Athistamani, PS, transcribed by her, corrected and signed by me this the 2nd of November, 2026]

[Justice G. Chandrasekharan] CHAIRPERSON