MANU/GJ/1069/2020

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

R/Letters Patent Appeal No. 159 of 2020 in R/Special Civil Application No. 19920 of
2019, Civil Application No. 1 of 2020 in R/Letters Patent Appeal No. 159 of 2020,
R/Letters Patent Appeal No. 160 of 2020 in Special Civil Application Nos. 19918 of 2019
and Civil Application No. 1 of 2020 in R/Letters Patent Appeal No. 160 of 2020 in
Special Civil Application No. 19918 of 2019
Decided On: 17.08.2020
Appellants: Punjab National Bank
Vs.
Respondent: Mithilanchal Industries Pvt. Ltd.
Hon'ble Judges/Coram:
Vikram Nath, C.J. and A.J. Shastri, J.
Counsels:
For Appellant/Petitioner/Plaintiff: K.M. Parikh and Kuldeep K. Adesara
For Respondents/Defendant: R.S. Sanjanwala, Senior Advocate and Sandip C. Bhatt
JUDGMENT
Vikram Nath, C.J.
1 . We would like to begin by the saying that the biggest problem that confronts the
judiciary today is, pendency of cases. The present matter before us, certainly adds to
the problem and is a classic example of how such cases contribute to the judicial
system getting over-burdened. What could have been done 3 years ago by issuance of a
fresh notice by merely adding a few words to satisfy the requirement laid down by law,
has been delayed unnecessarily and contested in a manner that has left us bewildered.
This mindset of Governmental agencies/undertakings such as the appellant bank, a
nationalised Bank before us, to engage in such frivolous, vexatious and impractical
litigation demonstrates the gross indifference of the administration towards litigative
diligence.
2 . The present litigation initiated by the appellant Bank, right from the inception has
resulted only in loss of the time of the various judicial forums that have been
approached by the appellant Bank and is also a drain on the public exchequer. What
perplexes us most, is that in such financial matters, the objective is quick recovery and
lowering the possibility of losses. However, by engaging in the present litigation, the
attitude adopted by the appellant Bank and its officers has borne results that are against
the interests of the Bank and a matter that could have been laid to rest by rational
thinking has been unnecessarily dragged for 3 years. When such litigation reaches our
doorsteps, we feel exasperated by the inaction or rather the wrongful action and by the
policy of blindly engaging in litigation before various judicial forums as entities such as
the appellant Bank before us are expected to exercise finer sense and sensibility in their
litigation policy, as compared to an individual litigant.
3 . The Punjab National Bank (hereinafter referred to as 'the Secured Creditor') has
preferred these two Letters Patent Appeals under Clause 15 of the Letters Patent
assailing the correctness of the judgment and order dated 14.11.2019 passed by the

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learned Single Judge in two connected Special Civil Application Nos. 19918 of 2019 and
19920 of 2019 whereby the learned Single Judge dismissed both the writ petitions by a
common judgment.
4. As both the appeals have more or less similar facts and identical legal issues, except
that the Borrowers in the two cases are different, the same are taken up together just as
before the learned Single Judge. The respondent companies are the Borrowers of the
appellant Bank-the Secured Creditor and had taken credit facilities as also term loans
against securities which included hypothecation of plant and machinery, stock and book
debts, mortgage of factory land and building and other immovable properties belonging
to the promoters. These loans were taken some time in the year 2010 to 2013. We are
not going into the facts as they are more or less admitted insofar as the borrowings are
concerned and furnishing of the securities. There is also reference to certain
correspondence regarding an issue relating to rate of interest. This is also apparent
from the judgment of the learned Single Judge.
5 . At some stage, the Borrowers defaulted in repayment of the loans, as a result of
which the Secured Creditor classified the accounts of the Borrowers as Non Performing
Accounts. Subsequently, the Secured Creditor issued demand notice dated 29.12.2014
under Section 13 (2) of the Securitization and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (hereinafter referred to as "the SARFAESI
Act"). The Borrowers submitted objections/representation under Section 13(3A) of the
SARFAESI Act against the notice under Section 13(2). However, the
objection/representation of the Borrowers were not found to be satisfactory.
Accordingly the Secured Creditor called upon the Borrowers to deliver possession under
Section 13(4) of the SARFAESI Act. Further the Secured Creditor applied under Section
14 of the SARFAESI Act which was favourably decided.
6 . In the meantime, the Borrowers approached the Debt Recovery Tribunal by way of
Securitization Application registered as Securitisation Application Nos. 47 and 48 of
2015 under Section 17 of the SARFAESI Act assailing the notice under Section 13(2),
13(4) and the action taken under Section 14 on various grounds. These applications
were responded by the Secured Creditor and pleadings were exchanged.
7. The Debt Recovery Tribunal vide judgment and order dated 22.06.2017 set aside the
demand notice under Section 13(2) of the SARFAESI Act and all consequential
proceedings and further directed the Secured Creditor to restore the possession with the
liberty to proceed afresh in accordance to law. The finding of the Tribunal was that the
notice was not in accordance with the statutory provision provided in Section 13(3) of
the SARFAESI Act as it did not contain the details of the amount due and also the
correct details of the secured assets. It would be worthwhile to quote paragraphs 9 and
17 to 19 of the Tribunal's judgment which read as follows:-
"9. Respondent bank issued demand notice dated 29.12.2014 under Section
13(2) of SARFAESI Act 2002 for an amount of Rs. 6,44,18,748/- outstandingin
Cash Credit Limit, an amount of Rs. 36,12,391/- outstanding in Term Loan-I
Account and an amount of Rs. 77,38,309/- outstanding in Term Loan-II
Account. Thus respondent Bank has claimed a total amount of Rs.
7,57,69,448/- outstanding as on 30.11.2014. As per Demand Notice, account
has been classified as Non-Performing Asset on 27th December, 2014 as per
guidelines issued by Reserve Bank of India. Respondent bank has placed on
record copy of account pertaining to each account. As per Demand Notice, the
contractual rate of interest is claimed from 01.12.2014 until payment in full is

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made within a period of 60 days. However, Demand Notice is silent regarding
rate of interest charged in each of the accounts. The Demand Notice only
mention regarding facility advanced, limit sanctioned and balance outstanding
as on 30.11.2014. However, rate of interest charged in the Cash Credit account
from 01.01.2014 to 30.06.2014 is 14.5% p.a. with monthly rests. The rate of
interest charged from 1st July, 2014 to 30th November, 2014 is 13.75% p.a.
with monthly rests. Applicants have placed on record copy of sanction letter
dated 4th February, 2013 wherein interest agreed by the applicants by
acceptance of sanction letter for Cash Credit limit is base rate plus 4.25%
subject to change from time to time as per RBI/HO guidelines and credit risk
rating. Applicants have also agreed to pay penal interest @ 2% p.a. Authorized
Officer is bound to give full details of amount to recovered and secured asset as
per mandatory provision of Section 13(3) of the SARFAESI Act 2002.
Respondent bank is not entitled to compound penal interest. However conduct
of account reveals that penal interest is also charged from time to time and
compounded on monthly basis contrary to guidelines issued by Reserve Bank of
India and law laid down by Hon'ble Apex Court in case of Central Bank of India
versus Ravindra and others.
**** ***** **** *****
17. Therefore, in view of aforesaid facts and law applicable thereon, there is no
necessity to give details regarding bifurcation of interest, etc. in the Demand
Notice. However, Authorized Officer is bound to give the details of the amount
payable by the borrower as well as details of secured asset. The details include
loan sanctioned or disbursed to the borrower, rate of interest charged and
amount outstanding as on date mentioned in the Demand Notice. In the present
case, the Authorized Officer has given only amount sanctioned and payable by
the borrower. He has not provided rate of interest at which the amount has
been claimed prior to 01.12.2014. The respondent Bank has charged penal
interest and capitalized the same time and again on monthly basis. Authorized
Officer was having opportunity to explain the details while deciding objection of
the applicant and to assure applicants that amount inflated due to compounding
penal interest will be excluded. But he has failed to avail opportunity to justify
his action on the objection raised by the applicant. The details of secured asset
are not as per mortgage deed no. 489 dated 07.02.2013. Therefore, Authorized
Officer has failed to comply mandatory provision of Section 13(3) of the
SARFAESI Act 2002. Therefore, Demand Notice dated 29.12.2014 is not
sustainable at law and same is hereby quashed and set aside.
1 8 . Since Demand Notice has been set aside as above, further action of
respondent Bank consequent upon Demand Notice dated 29th December, 2014
is also quashed and set aside. It is settled legal proposition that if initial action
is not in consonance with law, the subsequent proceedings would not sanctify
the same. In such a fact situation, the legal maxim 'sublato fundamento credit
opus' is applicable, meaning thereby in case a foundation is removed, the
superstructure automatically falls.
1 9 . Therefore, in view of aforesaid observation of mine, Securitization
Application is allowed with no order as to costs. Respondent Bank is directed to
restore the possession of the property in question. Respondent Bank is at
liberty to proceed afresh under the provisions of SARFAESI Act 2002 in
accordance with law. However respondent bank shall before taking action under

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 provision of SARFAESI Act 2002 qua fat No. 5B-502, Brij Ratan Apartment,
Parle Point Surat shall get rectification of mortgage deed no. 489 dated
07.02.2013."
8 . Further, according to the Secured Creditor, an application was moved before the
Debt Recovery Tribunal for granting stay of the operation of the judgment and order
dated 22.06.2017 upon which the Debt Recovery Tribunal is said to have orally stayed
the operation of the judgment for 4 weeks. In the meantime, according to the appellant
Secured Creditor, the Borrowers re-entered into their properties but at a later stage, the
Borrowers stated before the Debt Recovery Tribunal that the possession was still with
the Secured Creditor.
9 . The Secured Creditor preferred two appeals before the Debt Recovery Appellate
Tribunal on 18.07.2017 registered as Securitisation Appeal Nos. 130 and 131 of 2017.
The Secured Creditor in the meantime had filed an application for contempt before the
Debt Recovery Tribunal registered as Misc. Application No. 44 of 2017 in Securitisation
Application No. 47 of 2015. During its pendency, the Secured Creditor preferred Special
Civil Application No. 14741 of 2017 before this Court. In the said petition, the
proceedings before the Debt Recovery Tribunal and the Debt Recovery Appellate
Tribunal were stayed by this Court vide order dated 08.08.2017. Later on, vide order
dated 24.06.2019, the learned Single Judge disposed of Special Civil Application No.
14741 of 2017 with a direction to the Debt Recovery Appellate Tribunal to proceed to
decide the Securitization Appeal on or before 31.10.2019 and in the meantime, the
contempt proceedings before the Debt Recovery Tribunal would remain stayed.
1 0 . The Debt Recovery Appellate Tribunal, Mumbai, vide judgment and order dated
23.08.2019 dismissed both the appeals of the Secured Creditor. The findings recorded
by the Appellate Tribunal and the observations made are recorded in paragraph 4 of the
judgment in Appeal No. 130 of 2017. It is relevant to state here that similar
observations are recorded in paragraph 4 of the judgment in Appeal No. 131 of 2017.
The Appellate Tribunal made observations against the Bank in paragraph 4 of its
judgments, as such, the same is reproduced below:
"4. When the Tribunal below specifically recorded a finding that Bank has not
followed Section 13(3) of the SARFAESI Act, the Legal Department of the Bank,
before recommending to file Appeal, should have examined the notice dated
29.12.2014 with reference to provisions of SARFAESI Act. If the appellant has
issued a fresh 13(2) notice immediately after the disposal of the S.A. rectifying
the mistake, by this time other steps could have been completed and the Bank
might have realized money by this time."
11. Aggrieved by the judgment of the Debt Recovery Appellate Tribunal, the Secured
Creditor preferred two Special Civil Application Nos. 19920 and 19918 of 2019. The
learned Single Judge vide common judgment and order dated 14.11.2019 dismissed
both these Special Civil Applications, confirming the orders of the Debt Recovery
Tribunal and the Debt Recovery Appellate Tribunal. The finding as recorded by the
learned Single Judge in paragraph 7.2 is reproduced below:
"7.2 The necessity to give the details of the amount becomes more important
because even though the agreements were entered into and may be that the
respondent borrower was aware of the rate of interest the respondent borrower
was aware of the rate of interest that was needed to be charged, the terms and
conditions of the agreements make it abundantly clear that the rate of interest

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 that the base rate are subject to change by the bank from time to time and the
revised rate of interest shall accordingly be charged from time to time in the
said account. These stands would obviously make it incumbent upon the bank
while issuing notice under Section 13(2) of the Act to give details of the
amount payable under a notice under Section 13(2). The Tribunal while
considering the issue at hand has relied on a few decisions."
12. It is thereafter that the present two appeals have been preferred.
13. We have heard Mr. K.M. Parikh, learned Senior Counsel with Mr. Kuldeep Adesara,
learned counsel for the appellant Secured Creditor and Mr. R.S. Sanjanwala, learned
Senior Counsel assisted by Mr. Sandip Bhatt, learned counsel for respondent Nos. 1 to
5. Both the learned counsel for the parties have agreed that the appeals may be finally
heard at the stage of admission itself and as such we have given a very patient hearing
to the learned counsel for the parties.
14. Right from the stage of Section 13(2) of the SARFAESI Act and from the stage of
opportunity to the Borrowers to file their reply, the Borrowers had specifically stated
that the notice under Section 13(2) was defective and invalid as it was not in
compliance to the statutory provisions contained in Section 13(3) of the SARFAESI Act.
It did not contain the details of the amount payable by the Borrowers as also the details
of the secured assets. The Secured Creditor thought it otherwise that the details of the
amount payable by the Borrowers mentioned in Section 13(3) of the SARFAESI Act only
requires the Secured Creditor to mention one single figure of the total outstanding
amount without giving any break up or details of the amount payable in the form of the
principal amount outstanding, interest payable on it for different periods whether at fat
or floating rates, any penal interest, the amount of costs etc. or any other amount under
any other head which would be chargeable from the Borrowers. Even with respect to the
details of the secured assets, the Secured Creditor did not care or deem it proper to
correct it.
15. The Debt Recovery Tribunal, the Debt Recovery Appellate Tribunal and the learned
Single Judge of this Court concurrently and consistently based upon bare perusal of
Section 13(3) of the SARFAESI Act as also the law on the point held against the Secured
Creditor. The Secured Creditor instead of correcting its mistake as had been pointed out
by the Tribunal, the Appellate Tribunal and the learned Single Judge, has now filed the
present appeals and has sought to canvass that it was not necessary for the Secured
Creditor to provide the breakup of the outstanding amount and mention of one single
figure would be due compliance of the provisions under Section 13(3) of the SARFAESI
Act. Further, according to the appellant, Secured Creditor, the details of secured asset
are also correct.
16. Mr. Parikh, the learned Senior Counsel made elaborate submissions on the point
beginning from the enforcement of the SARFAESI Act, the object and purpose of
bringing out the said legislation, the scheme of the Act. After referring to the complete
scheme of the Act, the submission of Mr. Parikh, the learned Senior Counsel is that the
only requirement under Section 13(3) of the SARFAESI Act is of providing the amount
payable by the borrower and the details of the secured assets intended to be enforced.
There is no other mandatory requirement to be incorporated in a notice under Section
13(3).
17. It was next submitted by Mr. Parikh that under Section 17 of the SARFAESI Act, the
Debt Recovery Tribunal could not test the correctness or validity of a notice under

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Section 13(2) of the SARFAESI Act. According to Mr. Parikh, it is only after an order
under Section 13(4) or 14 of the SARFAESI Act is passed that Section 17 comes into
play and the Tribunal could only examine the validity of the action taken under Section
13(4) or Section 14 of the SARFAESI Act. According to Mr. Parikh, the Tribunal
exceeded its power vested under Section 17 and as such the impugned order passed by
the Tribunal as affirmed by the Appellate Tribunal and the learned Single Judge are
untenable in law and requires to be set aside.
18. Although Mr. Parikh in his written submission has given detailed arguments running
into 15 pages, but the substance of the arguments is only what is recorded above.
Further reliance is placed upon the following decisions by the learned Senior Counsel
Mr. Parikh:
(i) ITC Limited vs. Blue Coast Hotels Limited and others, reported in
MANU/SC/0263/2018 : (2018) 15 SCC 99.
(ii) Vasu P. Shetty vs. M/s. Hotel Vandana Palace and others, reported in
MANU/SC/0341/2014 : (2014) 5 SCC 660.
(iii) Tirupati Storage and Allied Private Limited vs. The United Commercial
Bank, Kolkata, reported in MANU/BH/0825/2012 : 2012 (4) PLJR 748.
(iv) Maradia Chemicals Limited vs. Union of India and others, reported in
MANU/SC/0323/2004 : (2004) 4 SCC 311.
(v) United Bank of India vs. Satyawati Tondon and others, reported in
MANU/SC/0541/2010 : (2010) 8 SCC 110.
(vi) Authorized Officer, Indian Overseas Bank and others vs. Ashok Saw Mill,
reported in MANU/SC/1219/2009 : (2009) 8 SCC 366.
(vii) Kanaiyalal Lalchand Sachdev vs. State of Maharashtra, reported in
MANU/SC/0103/2011 : (2011) 2 SCC 782.
With reference to various case-laws detailed herein above, having gone through each of
them we may say with respect that they have no application in the facts and
circumstances of the present case and the legal issues relevant for the present
proceedings.
19. Mr. Parikh in his written submission has also referred to in detail regarding the One
Time Settlement offered, the possession having been taken by the Secured Creditor
after the order under Section 14 of the SARFAESI Act was passed, thereafter the
Borrowers having re-entered into possession and thereby committing contempt for
which separate proceedings were being initiated and about the ownership of one of the
properties mortgaged. In our considered opinion, all these facts are not relevant for
deciding the present controversy and they pale into insignificance and become irrelevant
once the Debt Recovery Tribunal's order for setting aside the notice under Section 13(2)
of the SARFAESI Act and further directing the Secured Creditor to restore the possession
of the property to the Borrowers having remained unaltered by the Appellate Tribunal
and the learned Single Judge.
20. On the other hand, Mr. Sanjanwala, the learned Senior Counsel for the Borrowers
submitted that the orders passed by the Tribunal, the Appellate Tribunal and the learned
Single Judge are just, valid and proper. They are in accordance to the statutory

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provisions of Section 13 and its sub-sections of the SARFAESI Act. It is also submitted
that there was no other view possible except the view taken by the learned Single
Judge, the Tribunal and the Appellate Tribunal.
2 1 . Mr. Sanjanwala further submitted that the Debt Recovery Tribunal had given
opportunity to the Secured Creditor to issue fresh notice in accordance to law as far
back as in June, 2017, but the Secured Creditor taking a stringent stand which is
untenable in law has been dragging the Borrowers into unnecessary litigation right upto
this Court. This being the fourth round, it does not at all appear to be a logical and
reasonable action on the part of a nationalized bank, the Secured Creditor.
22. Shri Sanjanwala further submitted that the Secured Creditor has lost almost three
years litigating before different forums to defend its notice which is at the face of it
invalid. According to him, it is the Secured Creditor alone which can answer this
question but since the Borrowers have been successful in all the three innings, these
appeals which themselves have limited scope, deserve to be dismissed with costs.
23. Mr. Sanjanwala has placed reliance not only on the judgments which have been
relied upon by the learned Single Judge but has placed reliance upon the judgment of
this Court dated 17.01.2019 passed in Special Civil Application No. 690 of 2019
between Priyesh Agro Industries and others vs. Union Bank of India and others. Mr.
Sanjanwala has further placed reliance upon the order passed by a Division Bench of
this Court dated 19.02.2019 passed in Letters Patent Appeal No. 422 of 2019 preferred
against the judgment of the learned Single Judge dated 17.01.2019, which was allowed
to be withdrawn by the appellant.
24. In view of the background and the facts and circumstances of the case as recorded
above, there are two points for consideration. Firstly the interpretation of the words
"details of the amount payable by the borrower and the secured assets intended to be
enforced" mentioned in sub-section (3) of Section 13 of the SARFAESI Act and secondly
whether the Debt Recovery Tribunal under Section 17 of the SARFAESI Act could test
the validity of notice under Section 13(2) of the SARFAESI Act.
FIRST POINT: DETAILS TO BE MENTIONED [SECTION 13(3) ]
25. The notice dated 29.12.2014 under Section 13(2) issued by the appellant bank is
reproduced below:
"Date: 29 December 2014
By Regd. AD
To,
1. M/s. Mithilanchal Industries Pvt.
Ltd., Plot No. 503, Road No. 4,
GIDC, Sachin, Surat-394230.
2. M/s. Mithilanchal Industries Pvt.
Ltd., Plot No. 7311/1, Road No.
7 5 B , GIDC, Sachin, Surat-
394230.
3. M/s. Mithilanchal Industries Pvt.
Ltd. 2nd Floor, Plot No. C-
4 6 / 4 7 , City Industrial Estate,

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 Near Swaminarayan Temple,
Udhna, Surat-394510.
Dear Sir,
NOTICE U/S. 13(2) of the Securitization and Reconstruction of Financial Assets
and Enforcement of Security Interest Act 2002 (SARFAESI).
Reg: Credit facilities availed by M/s. Mithilanchal Industries Pvt. Ltd. our branch
Office: Surat-Main.
You, M/s. Mithilanchal Industries Pvt. Ltd. has availed the following credit
facilities.
S. Facility Limit (Rs. InBalance O/s as
No. lacs) on 30.11.2014
1. Cash Rs. 600.00 Rs.
Credit 6,44,18,748.00
2. T/L 1 Rs. 89.36 Rs. 36,12,391.00
3. T/L 2 Rs. 90.41 Rs. 77,38,309.00
Total Rs. 779.77 Rs.
7,57,69,448.00
Due to default in payment of installment/interest/principal debt, the account
has been classified as Non Performing Asset on 27.12.2014 as per Reserve Bank
of India guidelines.
In the circumstances, we are unable to permit continuation of the above
facilities granted. We, therefore, hereby recall the above facilities.
The amount due to the Bank as on 30.11.2014 is Rs. 7,57,69,448.00 (rupees
Seven Crore Fifty Seven Lac Sixty Nine Thousand Four Hundred Forty Eight
only) with further interest and cost with effective from 01.12.2014 until
payment in full (hereinafter referred to as "Secured Debt").
To secure the outstanding under the above said facilities, you have, inter alia,
created security interest in respect of the following properties/assets:
S. Facility Security
No.
1. Cash Hypothecation of Stocks &
Credit Book Debts and entire
Current assets of the
Company
2. T/L Hypothecation of Entire
Plant and Machinery
Collateral:
1 . Factory Land and Building situated at Plot No. 7311/1, Near Road
No. 8 and 73/B, GIDC, Sachin, Surat Owned by M/s. Telstar Enterprise)
2 . Flat No. 5B/502, Brij Ratan Apartment, Near Hotel Gateway, Parle
Point, Surat (owned by Sh. Vivekanand D. Jha & Smt. Vibha

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 Vivekanand Jha)
We hereby serve upon you notice under Section 13(2) of SARFAESI Act 2002
and call upon you to pay the entire amount due to the Bank as on 30.11.2014
Rs. 7,57,69,448.00 (rupees Seven Crore Fifty Seven Lac Sixty Nine Thousand
Four Hundred Forty Eight only) with further interest and cost with effect from
01.12.2014 at the contracted rate until payment in full within 60 days (sixty
days) from the date of this notice. In default, besides exercising other rights of
the Bank as available under Law, the Bank is intending to exercise any or all of
the powers as provided under section 13(4) of the Securitization and
Reconstruction of Financial Assets and Enforcement of Security Interest Act,
2002 (hereinafter referred to as "the Act").
The details of the secured assets intended to be enforced by the Bank, in the
event of non-payment of secured debt by you are as under:
1 . Hypothecation of Stocks & Book Debts and entire Current assets of
Company
2 . Factory Land and Building situated at Plot No. 7311/1, Near Road
No. 8 and 73/B, GIDC, Sachin, Surat Owned by M/s. Telstar Enterprise)
2 . Flat No. 5B/502, Brij Ratan Apartment, Near Hotel Gateway, Parle
Point, Surat (owned by Sh. Vivekanand D. Jha & Smt. Vibha
Vivekanand Jha)
Please take notice that in terms of section 13(13) of the said Act, you
shall not, after receipt of this notice, transfer by way of sale, lease or
otherwise (other than in the ordinary course of business) any of the
secured assets above referred to, without prior written consent of the
Bank. You are also put on notice that any contravention of this
statutory injunction/restraint, as provided under the said Act, is an
offence.
If for any reason, the secured assets are sold or leased out in the
ordinary course of business, the sale proceeds or income realized shall
be deposited/remitted with/to the Bank. You will have to render proper
account of such realization/income.
*We reserve our rights to enforce other secured assets
Please comply with this demand under this notice and avoid all
unpleasantness. In case of non-compliance, further needful action will
be restored to, holding you liable for all costs and consequences.
This notice is issued without prejudice to the bank taking legal action
before DRT/Court, as the case may be.
Yours faithfully
For Punjab National Bank
Sd/-
Mayur Sheth
Chief Manager
(With addresses)
c.c. 1. Shri Suman Kumar Dilip Kumar Jha

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 385, Sapna Nagar, Amamboli-2
Amboli, Taluka-Kamrej
Surat.
2. Shri Mayur Dipakbhai Mistry
156, Ranchhodji Park-2
Katargam
Surat.
3
Shri Shri Vivekanand D.
Vivekanand D. Jha Flat No. 5B/502,
Jha 902, Brij Ratan
Subham Apartment, Near
Apartment-1, Hotel Gateway, Parle
Near SargamPoint, Surat-395007.
Shopping
Center, Parle
Point, Surat-
395007
4.
Smt. VibhaSmt. Vibha
Vivekanand Vivekanand Jha
Jha
Flat No. 5B/502, Brij
902, Subham Ratan Apartment,
Apartment-1, Near Hotel Gateway,
Near SargamP a r l e Point, Surat-
Shopping 395007.
Center, Parle
P o i n t , Surat-
395007
5. M/s. Telstar Enterprise
Office - Plot No.7311/1
Road No.73/B,
GIDC, Sachin
Surat."
26. A perusal of the said notice only mentions aggregate amount, but does not give the
details of the outstanding amount payable by the Borrower. It does not conform to
Section 13(3) of the SARFAESI Act, which provision is reproduced here under:
"13(3). The notice referred to in sub-section (2) shall give details of the
amount payable by the borrower and the secured assets intended to be
enforced by the secured creditor in the event of non-payment of secured debts
by the borrower."
2 7 . The Borrowers-respondents preferred representation/objection dated 02.03.2015
under Section 13(3A) of SARFAESI Act requiring the Secured Creditor to withdraw the
notice and to issue a fresh notice in conformity with subsection (3). The Secured

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Creditor apparently did not find the representation/objections to be acceptable and
accordingly communicated to the Borrowers.
28. The words used in Section 13(3) of the SARFAESI Act are "details of the amount
payable by the borrower as also the details of the secured assets intended to be
enforced by the Secured Creditor." So, the notice under Section 13(2) of the SARFAESI
Act has to necessarily contain the details on the above two counts.
2 9 . Insofar as the first part is concerned i.e. regarding the amount payable by the
borrowers, if the intention of the Legislature was only to provide the total outstanding
amount or the aggregate amount outstanding and payable by the borrowers, the
language would have been different. It would not have been necessary to incorporate
Sub-Section (3) in Section 13 of the SARFAESI Act. In Sub-Section (2) of Section 13 of
the SARFAESI Act, it is also mentioned that the Secured Creditor may require the
borrower by notice in writing to discharge in full his liabilities to the Secured Creditor.
The said liabilities would be mentioned in view of the provisions of Sub-Section (2)
itself. But, consciously, Sub-Section (3) was incorporated so as to ensure that the
details of the amount payable are provided in the notice. Such details would include the
relevant calculations made by the Bank under different heads which had become due
and payable at the end of the borrower.
30. There is another reason for incorporating Sub-Section (3). Sub-Section 3(A) gives
right to the borrower to make a representation or raise an objection against the notice
under Sub-Section (2). Unless the borrower has the details of the amounts found due
and payable by the Secured Creditor and being demanded as such under a notice under
Sub-Section (2), the borrower would not be in a position to make any representation or
raise any objection. It is only when the amounts under different heads are provided to
the borrower that it could raise objection under any of the heads where the borrower
finds that the amount quantified is not correct. Without there being any details
mentioned in the notice, the very purpose of Sub-Section 3(A) would also be lost to a
large extent.
31. From a perusal of the material on record and as also discussed not only by the
Tribunal but also the learned Single Judge there was an issue raised earlier and pending
between the parties regarding the rate of interest at which the Secured Creditor was
calculating. According to the borrower, the rate of interest was higher as was being
applied by the Secured Creditor than what actually it could claim under the agreement.
The learned Single Judge had referred to such facts in paragraphs 5.1 to 6.1 of the
judgment. The learned Single Judge had also placed reliance upon the view taken by
the Patna High Court as also the High Court of Calcutta while interpreting the provisions
of Sub-Sections (2) and (3) of Section 13 of the SARFAESI Act.
32. For all the reasons recorded above, the first argument canvassed before us being
devoid of any merits is accordingly rejected.
SECOND POINT: SCOPE OF SECTION 17 OF THE SARFAESI ACT:-
3 3 . At first we proceed to deal with the scheme as envisaged in Section 17 of the
SARFAESI Act. Under subsection (1) of Section 17 any person aggrieved by any of the
measures referred to in sub-section (4) of Section 13 taken by the secured creditor can
prefer an appeal (application) to the Debts Recovery Tribunal within 45 days from the
date on which such measures had been taken. Under subsection (2) of Section 17, the
Tribunal is bound to consider whether any of the measures referred to under sub-
section (4) of Section 13 taken by the secured creditors are in accordance with the

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provisions of the Act. Under subsection (3) of Section 17, after examining the facts and
circumstances of the case, and evidence produced by the parties, if the Tribunal comes
to the conclusion that any of the measures referred to in sub-section (4) of Section 13
taken by the secured creditor are not in accordance with the provisions of the Act and
the rules, and require restoration of the management of the business or restoration of
possession of the secured assets to the borrower, it may declare such action as invalid
and restore possession of the secured assets to the borrower or restore the
management of the business to the borrower, as the case may be. As a necessary
corollary, sub-section (4) of Section 17 provides that if the Tribunal declares that the
recourse taken by the secured creditor under sub-section (4) of Section 13 was in
accordance with the provisions of the Act and the rules made thereunder, then,
notwithstanding anything contained in the Act or any other law for the time being in
force, the secured creditor shall be entitled to take recourse to one or more of the
measures specified under sub-section (4) of Section 13 to recover his secured debt.
34. On a plain reading of Section 17, it is seen that the Tribunal has wide powers to
restore possession in favour of the borrower, if such action taken under sub-section (4)
of Section 13 is declared invalid. Even where the property is sold or dealt with, pending
hearing of the application under Section 17, the Tribunal is not rendered powerless to
restore possession in favour of the borrower, if such action taken under sub-section (4)
of Section 13 is declared invalid. In such an eventuality, sub-section (3) of Section 17
gives ample powers to the Tribunal to direct restoration of the possession or restoration
of management, as the case may be or to pass such other order, as it may consider
proper and necessary in relation to any of the recourse taken by the secured creditor
under sub-section (4) of Section 13.
35. We may refer to and rely upon the judgment of the Supreme court in Transcore vs.
Union of India and another reported in MANU/SC/5319/2006 : (2006) 5 CTC 753. In
Transcore, the main question, which fell for consideration of the Supreme Court, was
whether the withdrawal of an O.A. in terms of the first proviso to Section 19(1) of the
Recovery of Debts due to Banks and Financial Institutions Act, is a condition precedent
to taking recourse to the Securitisation Act. In the context of this question, the Court
examined the scheme of the Securitisation Act, and it was observed:
"13. ...The NPA Act is inspired by the provisions of the State Financial
Corporations Act, 1951 (SFC Act), in particular Sections 29 and 31 thereof. The
NPA Act proceeds on the basis that the liability of the borrower to repay has
crystallized; that the debt has become due and that on account of delay the
account of the borrower has become sub-standard and non-performing. The
object of the DRT Act as well as the NPA Act is recovery of debt by non-
adjudicatory process...
22. ...On reading Section 13(2), which is the heart of the controversy in the
present case, one finds that if a borrower, who is under a liability to a secured
creditor, makes any default in repayment of secured debt and his account in
respect of such debt is classified as non-performing asset then the secured
creditor may require the borrower by notice in writing to discharge his liabilities
within sixty days from the date of the notice failing which the secured creditor
shall be entitled to exercise all or any of the rights given in Section 13(4).
Reading Section 13(2) it is clear that the said subsection proceeds on the basis
that the borrower is already under a liability and further that, his account in the
books of the bank or FI is classified as substandard, doubtful or loss. The NPA
Act comes into force only when both these conditions are satisfied. Section

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 13(2) proceeds on the basis that the debt has become due. It proceeds on the
basis that the account of the borrower in the books of bank/FI, which is an
asset of the bank/FI, has become non-performing. Therefore, there is no scope
of any dispute regarding the liability. There is a difference between accrual of
liability, determination of liability and liquidation of liability...
23. ...The point to be noted is that the scheme of the NPA Act does not deal
with the disputes between the secured creditors and the borrower. On the
contrary, the NPA Act deals with the rights of the secured creditors inter se. The
reason is that the NPA Act proceeds on the basis that the liability of the
borrower has crystallized and that his account is classified as non-performing
asset in the hands of the bank/FI...
24. ...However, under Section 17(2), the DRT is required to consider whether
any of the measures referred to in Section 13(4) taken by the secured creditor
for enforcement of security are in accordance with the provisions of the NPA Act
and the Rules made thereunder. If the DRT, after examining the facts and
circumstances of the case and the evidence produced by the parties, comes to
the conclusion that any of the measures taken under Section 13(4) are not in
accordance with the NPA Act, it shall direct the secured creditor to restore the
possession/management to the borrower (vide Section 17(3) of NPA Act). On
the other hand, after the DRT declares that the recourse taken by the secured
creditor under Section 13(4) is in accordance with the provisions of the NPA Act
then, notwithstanding anything contained in any other law for the time being in
force, the secured creditor shall be entitled to take recourse to any one or more
of the measures specified under Section 13(4) to recover his secured debt."
36. In Misons Leather Ltd. vs. Canara Bank, Chennai, MANU/TN/1500/2007 : (2007) 3
LW 500: 2007(4) ML J 245, the constitutional validity of the amended Section 17 was
challenged before a Division Bench of the Madras High Court on the ground that the
remedy of fling application under Section 17 of the Act which is declared to be in the
nature of the suit by the Supreme Court is totally taken away by the amendment and in
any event, the remedy is only an empty formality and does not protect the rights of the
borrowers, mortgagors and guarantors. Repelling this contention, the Division Bench
observed:
"10. We are afraid that the contention is totally misconceived. The provisions of
Section 17(1) of the Act provides remedy for the borrower/guarantor/mortgagor
to challenge the action of the Bank under Section 13(4) of the Act before the
Debt Recovery Tribunal. The Debt Recovery Tribunal is required to decide
whether the action of the Bank/Financial institutions, under Section 13(4) is in
accordance with the provisions of the Act and the rules framed thereunder. It is
open to the borrower/guarantor/mortgagor to demonstrate before the Debt
Recovery Tribunal that resort to Section 13 of the Act is not permissible bylaw.
In a given case, the claim of the Bank/Financial Institutions may be barred by
limitation or there may be cases, where the adjustment of the amount paid is
not reflected in the notice or the calculation of interest may not be in
accordance with the contract between the parties. Needless to say that all such
grounds, which render the action of the Bank/Financial Institutions illegal can
be raised in the proceedings under Section 17 of the Act before the Debt
Recovery Tribunal.
11. Learned Additional Solicitor General and the learned counsel appearing for

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 banks and financial institutions fairly stated that all the objections which can be
legally raised in the reply to the notice under Section 13(2) of the Act can also
be raised in the proceedings under Section 17(1) of the Act. It would be for the
Debt Recovery Tribunal to decide in each case whether the action of the bank is
in accordance with the provisions of the Act and is legally sustainable."
37. As can be seen from the Statement of Objects and Reasons of the Securitisation
Act, the main purpose of the Securitisation Act, and in particular Section 13 thereof, is
to enable and empower the secured creditors to take possession of their securities and
to deal with them without the intervention of the Court. Therefore, in an application
under Section 17, the Tribunal is concerned only with the validity of the acts of the
secured creditor in taking possession of the securities and dealing with the same under
Section 13. In our opinion, all such grounds, which would render the action of the
bank/financial institution illegal, can be raised before the Tribunal in the proceedings
under Section 17. It is for the Tribunal to decide in each case whether the action of the
bank was in accordance with the provisions of the Act and legally sustainable. However,
we hasten to add that while considering the question of validity of the action of the
bank, it is not necessary for the Tribunal to adjudicate the exact amount due to the
secured creditors. In other words, the purpose of an application under Section 17 is not
the determination of the quantum of claim per se as the Tribunal is concerned with the
issue of the validity of the measures taken by the banks/financial institutions under
Section 13(4).
3 8 . The proviso to section 13(3A) of the SARFAESI Act specifically restricts the
borrower from approaching the Debts Recovery Tribunal under Section 17 or the Court
of District Judge under Section 17A of the SARFAESI Act at the stage of rejection of his
objection/representation under Section 13(3A) of the SARFAESI Act. It clearly mentions
that at the stage of communication, the borrower would not be conferred with any right
to move either before the Debts Recovery Tribunal or the Court of District Judge. The
use of the word at the stage of communication clearly indicates that at subsequent stage
such challenge could be made to the communication by the Secured Creditor under
Section 13(3A) of the SARFAESI Act. After the above stage, comes the stage of Section
13(4) where the secured creditor may take recourse to one or more of the measures
mentioned in sub-clauses (a), (b), (c) and (d) in case the borrower fails to discharge
his liability in full within the period specified in sub-section (2) of Section 13 of the
SARFAESI Act.
39. Upon recourse being taken under Section 13(4), Section 17 comes into play and
gives right to any person, including the borrower aggrieved by any of the measures
referred to in sub-section (4) of section 13 taken by the secured creditor or his
authorized officer. We are not concerned with the procedural part to be adopted under
Section 17 of the SARFAESI Act, but the question is whether while deciding the
application under Section 17 of the SARFAESI Act, the Debts Recovery Tribunal could
test the validity of the notice under Section 13(2) and also the procedure prescribed
under sub-section (3A) of Section 13 of the SARFAESI Act as canvassed by the learned
counsel for the appellant Secured Creditor.
4 0 . A reading of Section 13(4) of the SARFAESI Act gives power to the Secured
Creditor to take recourse to one or more of the measures provided in Clauses (a) to (d)
to recover his secured debt only where the borrower fails to discharge his liability in full
within the period specified in Sub-Section (2) thereof. Thus, there has to be a failure on
the part of the borrower to comply with the terms mentioned in Sub-Section (2). Failure
to comply with Sub-Section (2) would entail a prior duty/obligation on the part of the

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Secured Creditor to strictly comply with the terms mentioned therein, that is a valid
notice. The notice would be valid only upon complying with the conditions of Sub-
Section (3). Once the action taken at the stage of Section 13(4) of the SARFAESI Act is
questioned under Section 17 thereof, then the first and foremost thing to be tested
would be the valid action by the Secured Creditor under Sub-Section (2) of giving a
valid notice and therefore, there is failure on the part of the borrower to discharge his
liability. Now in the present case, if the liability itself is not validly communicated by
the Secured Creditor, there could not be a failure on the part of the borrower. The
Tribunal, therefore, would be well within its powers to test the validity of the notice
under Section 13(2) of the SARFAESI Act.
FURTHER ANALYSIS ON BOTH THE POINTS:
41. The action/recourse taken under Section 13(4) by the Secured Creditor would be
dependent upon its validity and legally justified action having been taken in the
previous sub-sections i.e. sub-sections (1), (2), (3) and (3A). If the procedure
prescribed or the requirement provided under the aforesaid sub-sections are not fulfilled
by the secured creditor the action/recourse under sub-section (4) of Section 13 would
fall. The recourse/action under Section 13(4) of the SARFAESI Act is based upon due
compliance in accordance with law of the previous sub-sections of Section 13 of the
SARFAESI Act. Whenever it is found that the Secured Creditor has not discharged its
obligations strictly in accordance to the provisions of sub-sections, in particular the
fulfillment of conditions under sub-section (3) and sub-section (3A), the
action/recourse under subsection (4) would fail and fall to the ground. The
action/recourse under sub-section (4) stand on the pillars of the valid action under sub-
sections (2), (3) and (3A). If any of those pillars is found to be shaky/defective, the
action/recourse under sub-section (4) must necessarily fall.
42. In order to test action/recourse under subsection (4) of Section 13 of the SARFAESI
Act in an application under Section 17, the Debts Recovery Tribunal has to examine that
whether the necessary foundation or the pre-requisites of taking action under Section
13(4) has been fulfilled or not. Where there is a failure or non-compliance, the Tribunal
has no other option but to hold that the action/recourse under sub-section (4) is invalid
and illegal.
43. The action/recourse under sub-section (4) of Section 13 is consequential to the
borrower failing to discharge his liability in full within the period specified in sub-
section (2), which speaks of secured creditor requiring the borrower by notice in writing
to discharge in full his liabilities within 60 days from the date of notice failing which the
secured creditor would be entitled to exercise all or any of the rights under sub-section
(4). The requirements of the notice under sub-section (2) is provided under sub-section
(3) which clearly mandates that the notice referred to in sub-section (2) shall give
details of the amount payable by the borrower and the secured assets intended to be
enforced by the secured creditor. If these details are not provided which are mandatory
in nature or which casts a mandate upon the secured creditor to provide such details,
the notice would be bad in law, which we have already held above.
4 4 . In the present case, the borrower took an objection of non-compliance of sub-
section (3), in his objection/representation given sub-section (3A), but despite the
same the Bank-Secured Creditor in the present case rejected the objection instead of
ensuring the compliance of sub-section (3). A perusal of the notice under sub-section
(2) which is already reproduced above does not spell out the details of the amount
payable by the borrower, but only mentions a lump sum aggregate amount. The dispute

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with regard to rate of interest being charged by the bank was pre-existing the stage of
section 13, and therefore, when the borrower called upon the Secured Creditor to
provide the details, as a fair and reasonable Secured Creditor-the appellant Bank ought
to have come out with such details, justification of such details would be a different
aspect, but the Bank could not withhold the details. Even the details of the secured
assets had not been correctly provided as recorded by the Tribunal, which finding has
not been altered or upset at any subsequent stage. If the Bank withholds the details, as
in the present case, then such action cannot be sustained.
45. The above discussion further strengthens the answers to both the questions. Firstly
that whether the bank was required to spell out the details or not, the answer would be,
'YES' and the Bank is required to furnish the details on its own and all the more when
the borrower demands it. Secondly, whether under Section 17, the Tribunal could
examine the validity of the notice under Section 13(2), the answer would again be
'YES'. The Tribunal has to examine the validity and only based upon the validity of
notice and validity of discharge of obligation of the secured creditor under sub-sections
(2), (3) and (3A) that the Tribunal would hold that the action under sub-section (4) to
be valid. In the present case, such action having been held to be invalid and as the
same is apparent from the record, no error could be found in the order of the Tribunal.
The appellate Tribunal as also the learned Single Judge rightly dismissed the appeal and
the writ petition filed by the Secured Creditor-the appellant Bank. Accordingly, the
present appeals fail and are liable to be dismissed. It is ordered accordingly.
46. The present case, as highlighted by us in the paragraphs hereinabove, is a classic
example how the judicial system is getting clogged with frivolous litigation. The facts
and the circumstances that have led to the fling of the present appeal before us, leave
us with no choice but to impose exemplary costs on the appellant Secured Creditor. The
Hon'ble Supreme Court has stressed in a catena of matters that costs should be in real
and compensatory terms and not merely symbolic. We are of the firm opinion that costs
act as a deterrent to vexatious, frivolous, impractical and unnecessary litigation. The
whole objective behind imposition of costs is that every litigant, especially big public
sector entities, like the appellant bank, would have to think twice before engaging in
such litigation, as the one before us.
4 7 . The appellant Secured Creditor ought to have at the first instance corrected its
mistake by issuing a fresh notice providing the details of the amount payable by the
Borrower as also correcting the details of the secured assets rather than continuing to
challenge it repeatedly before every possible forum and wasting its time. The litigation
is ultimately going to cause suffering to the appellant Bank i.e. Secured Creditor.
48. The Supreme Court in the case of Dnyandeo Sabaji Naik and Others vs. Pradhya
Prakash Khadekar and Others reported in MANU/SC/0233/2017 : (2017) 5 SCC 496 has
frowned upon frivolous and groundless flings. We quote the relevant observations:
"13. This Court must view with disfavour any attempt by a litigant to abuse the
process. The sanctity of the judicial process will be seriously eroded if such
attempts are not dealt with firmly. A litigant who takes liberties with the truth
or with the procedures of the Court should be left in no doubt about the
consequences to follow. Others should not venture along the same path in the
hope or on a misplaced expectation of judicial leniency. Exemplary costs are
inevitable, and even necessary, in order to ensure that in litigation, as in the
law which is practised in our country, there is no premium on the truth.

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 1 4 . Courts across the legal system-this Court not being an exception-are
choked with litigation. Frivolous and groundless flings constitute a serious
menace to the administration of justice. They consume time and clog the
infrastructure. Productive resources which should be deployed in the handling
of genuine causes are dissipated in attending to cases filed only to benefit from
delay, by prolonging dead issues and pursuing worthless causes. No litigant can
have a vested interest in delay. Unfortunately, as the present case exemplifies,
the process of dispensing justice is misused by the unscrupulous to the
detriment of the legitimate. The present case is an illustration of how a simple
issue has occupied the time of the courts and of how successive applications
have been filed to prolong the inevitable. The person in whose favour the
balance of justice lies has in the process been left in the lurch by repeated
attempts to revive a stale issue. This tendency can be curbed only if courts
across the system adopt an institutional approach which penalizes such
behavior. Liberal access to justice does not mean access to chaos and
indiscipline. A strong message must be conveyed that courts of justice will not
be allowed to be disrupted by litigative strategies designed to profit from the
delays of the law. Unless remedial action is taken by all courts here and now
our society will breed a legal culture based on evasion instead of abidance. It is
the duty of every court to firmly deal with such situations. The imposition of
exemplary costs is a necessary instrument which has to be deployed to weed
out, as well as to prevent the fling of frivolous cases. It is only then that the
courts can set apart time to resolve genuine causes and answer the concerns of
those who are in need of justice. Imposition of real time costs is also necessary
to ensure that access to courts is available to citizens with genuine grievances.
Otherwise, the doors would be shut to legitimate causes simply by the weight
of undeserving cases which food the system. Such a situation cannot be
allowed to come to pass. Hence it is not merely a matter of discretion but a
duty and obligation cast upon all courts to ensure that the legal system is not
exploited by those who use the forms of the law to defeat or delay justice. We
commend all courts to deal with frivolous flings in the same manner."
4 9 . In Union of India and others vs. Pirthwi Singh and others reported in
MANU/SC/0456/2018 : (2018) 16 SCC 363, the Supreme court observed thus:
"15. To make matters worse, in this appeal, the Union of India has engaged 10
lawyers, including an Additional Solicitor General and a Senior Advocate! This
is as per the appearance slip submitted to the Registry of this Court. In other
words, the Union of India has created a huge financial liability by engaging so
many lawyers for an appeal whose fate can be easily imagined on the basis of
existing orders of dismissal in similar cases. Yet the Union of India is increasing
its liability and asking the taxpayers to bear an avoidable financial burden for
the misadventure. Is any thought being given to this?
16. The real question is: When will the Rip Van Winkleism stop and Union of
India wake up to its duties and responsibilities to the justice delivery system?
17. To say the least, this is an extremely unfortunate situation of unnecessary
and avoidable burdening of this Court through frivolous litigation which calls
for yet another reminder through the imposition of costs on the Union of India
while dismissing this appeal. We hope that someday some sense, if not better
sense, will prevail on the Union of India with regard to the formulation of a
realistic and meaningful National Litigation Policy and what it calls 'ease of

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 doing business', which can, if faithfully implemented benefit litigants across the
country."
50. We accordingly are of the view that this matter requires costs to be imposed upon
the appellant Bank which we quantify at Rs. 5.00 lakhs per appeal. The amount of costs
to be deposited within one month from today with the Registrar General of this Court
whereupon the same shall be transmitted to the Gujarat State Legal Service Authority.
This amount is to be recovered from the Officers found responsible for carrying on this
frivolous litigation.
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