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2026 Supreme(Online)(DRAT) 243
DEBT RECOVERY APPELLATE TRIBUNAL
G. Chandrasekharan, Chairperson
Biji Jai – Appellant
Versus
Authorised Officer, CSB Bank Ltd. – Respondent
RA(SA)101/2025 | SA No.9/2021
For the Appellants/Petitioners: M/s K. Moorthy & Co.
For the Respondents: M/s V. Rajeswari, M/s T. Sai Krishnan and Co.
A borrower challenging SARFAESI measures must prove procedural violations or material discrepancies in extent or valuation with contemporaneous evidence; approved valuer's report prevails over chartered engineer's report absent comparable sale data.
Headnote:(A) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) - Sections 13(2), 13(3), 13(4), 14 and 18 - Appeal against dismissal of SA by DRT - Validity of mortgage, extent of property sold, valuation and reserve price - Whether there is discrepancy in extent of property mortgaged and sold - Whether property was undervalued - Whether mandatory procedures were followed.
(B) Mortgage - Creation of security interest - Equitable mortgage by deposit of title deeds - Loan application, sanction letter, and panel lawyer's report confirmed that mortgaged extent was 3.13 ares, not 3.64 ares - Discrepancy arose because partition deed mentioned 2.43 ares but actual available extent was only 1.92 ares - Appellants' contention of larger extent sold rejected. (Para 21)
(C) Valuation - Approved valuer under Wealth Tax Act vs. Chartered Engineer - Bank's valuation report from approved valuer accepted over appellant's report from Chartered Engineer - No comparable sale deeds or guideline value produced by appellants to challenge bank's valuation - Reserve price fixed based on forced/distress value - Sale at Rs.1.27 crores was for a right price. (Paras 23-25)
Facts of the case:
Appellants availed a loan of Rs.40 lakhs from the respondent bank, offering 3.13 ares of land with building as security. The account was classified as NPA on 25.2.2020. Bank issued demand notice, possession notice, and proceeded under Section 14 of SARFAESI Act to take physical possession. E-auction sale notices were issued; after first attempt failed, property was sold on 15.9.2022 for Rs.1.27 crores to respondents 3 and 4. Appellants filed SA No.9/2021 challenging the measures, which was dismissed by DRT-I, Ernakulam on 23.1.2025.
Issues: (i) Whether there was discrepancy in the extent of property mortgaged and sold (3.13 ares vs. 3.64 ares). (ii) Whether the property was undervalued and sold at an insufficient price. (iii) Whether mandatory procedures under SARFAESI Act were violated.
Findings of Court:
The Tribunal found that the loan documents, panel lawyer's report, and village officer's receipts confirmed the mortgaged extent as 3.13 ares. The alleged discrepancy was explained by the actual ground availability. The bank's valuation report from an approved valuer was accepted; the appellants failed to provide comparable sale deeds or guideline value to challenge it. All mandatory procedures were followed.
Ratio Decidendi: The court held that when a borrower creates an equitable mortgage by deposit of title deeds, the extent of property as per the loan application, sanction, and ground measurements prevails over the deed's paper extent. Discrepancies must be explained by contemporaneous documents. A valuation report from an approved valuer under the Wealth Tax Act is entitled to greater weight than a report from a chartered engineer, absent any material like comparable sales or guideline value to the contrary.
Result: Appeal dismissed. Order of DRT-I, Ernakulam confirmed.
| Table of Content |
|---|
| 1. pleadings and background of the sarfaesi application and appeal (Para 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8) |
| 2. submissions on extent of property, valuation, and bank's compliance (Para 9 , 10 , 11 , 12 , 13) |
| 3. court's analysis on extent discrepancy and procedural compliance (Para 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21) |
| 4. valuation reports and weight given to approved valuer's report (Para 22 , 23 , 24 , 25 , 26) |
| 5. confirmation of drt order and dismissal of appeal (Para 27 , 28 , 29 , 30) |
ORDER
1. This appeal is filed under Section 18 of the SARFAESI Act, against the order of the Learned Presiding Officer, DRT-I, Ernakulam dated 23.1.2025 passed in SA No.9/2021.
2. Appellants, as applicants filed SA No.9/2021 on the file of DRT-I, Ernakulam, challenging the measures taken under the SARFAESI Act, more specifically, Annexure-A4, Possession Notice issued under Section 13(4) of the SARFAESI Act, Annexure A1, Demand Notice, Annexure A20, E-Auction Sale Notice, Annexure-A11, order of the Learned ACJM, Ernakulam, Annexure A12, interim report of the Advocate commissioner and to declare the sale conducted by the respondents on 15.9.2022 as invalid, null and void ab-inito and for other consequential and incidental reliefs.
3. The case of the appellants in brief is that, they availed loan to the tune of Rs.40.00 lakhs from the respondent bank. Though bank had taken title deed of 2.43 ares in Survey No.73/2B of Edappally North Village together with building owned by the first appellant, the said property is not a secured asset. Reason is that no registered document had been executed for creation/charge. Appellants were regularly paying the loan instalments. However, with mala fide intention and without following the decisions of Hon’ble Supreme Court and Hon’ble High Court, respondent bank classified the loan account as NPA on 25.2.2020. After classifying the loan account as NPA, respondent bank sent a demand notice on 30.5.2020 under Section 13(2) of the SARFAESI Act. That was objected by the objection dated 10.6.2020. Without considering the objection, respondent bank issued Possession Notice dated 5.12.2020. Respondent bank had also filed OA No.142/2020 against the appellants for recovery of loan amount.
4. Respondent bank approached additional CJM, Ernakulam under Section 14 of the SARFAESI Act for taking physical possession of the secured asset in MC No.17/2021 on the file of ACJM Court, Ernakulam. Material particulars had been suppressed for obtaining the said order. Order was passed without application of mind. Appellants in OP(DRT) No.17/2022 approached the Hon’ble High Court of Kerala. Despite that, respondent bank dispossessed the appellants from the secured asset on 12.1.2022 forcibly with the help of the advocate commissioner. Hon’ble High Court of Kerala vide its order on 27.1.2022 directed the respondents 1 and 2 to consider the proposal of OTS, if any, submitted by the appellants. Appellants submitted OTS on 4.2.2022, but that was rejected by the respondents. Appellants, therefore, withdrew OP (DRT) No.17/2022 and filed OP (DRT) No.187/2022, challenging the dispossession from the secured asset.
5. Meanwhile, respondent bank issued E-Auction Sale Notice dated 22.3.2022 without following the mandatory procedures . It is submitted that in the secured asset there exists a four storied pucca RCC building with super built up area of 10,000 square feet in the property having a total extent of 3.64 ares. However, in the E-Auction sale notice, total extent was shown as only 3.13 ares. Property is not properly described giving details of the measurement of the building in the property. Reserve price was fixed at Rs.1.40 crores.
6. As per OA No.142/2020, mortgage was for 2.43 ares but the sale notice refers about 3.13 ares. Respondent bank again issued E-Auction Sale Notice on 8.8.2022 scheduling the sale on 15.9.2022, quoting low reserve price of Rs.1.26 crores. Even in this notice, wrong extent was given as 3.13 ares instead of 3.
