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Bombay Mercantile Cooperative Bank Ltd. through its Authorized Signatory Vs. M/s. U.P Gun House
Case NumberCA Nos. 6244-6245/2021
Date of JudgementJanuary 22, 2024
CourtThe Supreme Court of India
AppellantBombay Mercantile Cooperative Bank Ltd. through its Authorized Signatory
RespondentSaeedul Hasan Khan, M/s. U.P Gun House
BenchJustice Sanjiv Khanna and Justice Dipankar Datta.


In order to start a gun’s business, Saeedul Hasan Khan, the Gun House’s sole proprietor, took a loan of Rs. 2,00,000/- (rupees two lakhs only) from the Bombay Mercantile Cooperative Bank. Immovable property was mortgaged to secure the debt. The loan was deemed a non-performing asset by the bank after six years. The respondent received multiple notifications from the bank, as per the bank claims, yet payments continued to be unsuccessful from the respondent’s side. that prompted the bank to seize the assets held as mortgages and put them up for auction in order to recoup the debt. The bank claims to have given the respondent the notice of auction. On the other hand, the respondent asserts in his appeal that he never received the notification. Below, we’ll examine the rules and regulations related to the case in more detail. 

Facts of the Case

  1. Saeedul Hasan Khan, the Gun House’s sole proprietor, borrowed Rs. 2,00,000 (rupees two lakhs only) from the Cooperative Bank in 1996 in order to start a gun’s company. Immovable property was mortgaged to secure the debt.
  2. The loan was classified as a non-performing asset on February 30, 2002, because there was a balance owed of Rs. 2,39,812.41 (that is, two lakhs thirty-nine thousand eight hundred twelve and forty-one paisa only). 
  3. In accordance with Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, a notice in relation to the property was issued on March 22, 2006. The remaining balance was therefore Rs. 6,23,809/- (just six lakhs twenty-three thousand eight hundred nine rupees). 
  4. When the respondent failed to make payments, Cooperative Bank symbolically seized the property on July 9, 2009. A notification of possession was published in the Rashtriya Sahara newspaper on July 22, 2009. 
  5. The appellant filed a petition under Section 14 of the SARFAESI Act to obtain physical possession and went to the Lucknow Court of District Magistrate/Collector.
    On February 12, 2010, an ex parte order was passed because the respondent failed to show up despite being served. Application for recall of this order was filed by the respondent; it was dismissed on July 7, 2011, with the observation that the respondent had been given enough time to make payment but had failed. 
  6. The respondent’s One Time Settlement proposal of Rs. 6,36,860/- (rupees six lakhs thirty-six thousand eight hundred sixty only) was accepted by the appellant in response to the respondent’s request letter dated 03.11.2011. At that point, the entire amount owed was Rs. 15,37,083.41, (fifteen lakhs, thirty-seven thousand, eighty-three thousand and forty-one rupees). While the respondent paid the first installment of Rs. 50,000 (rupees fifty thousand only), the remaining Rs. 5,86,860 (rupees five lakhs eighty-six thousand eight hundred sixty only) was not paid by the respondent. This amount was supposed to be paid on or before March 29, 2012.
  7. The appellant notified the respondent on April 7, 2012, that the One Time Settlement proposal had been withdrawn and that, as of March 31, 2012, the respondent owed Rs. 15,91,424/- (that is, Rs. fifteen lakhs, ninety-one thousand, four hundred twenty-four only).
  8. The appellant gained possession of the property on July 14, 2012, and an inventory of the immovable assets was created. According to a valuation study, the property is worth only Rs. 29,70,000/- (rupees twenty-nine lakhs seventy thousand). Nonetheless, the property’s forced sale value was set at Rs. 22,28,000/- (rupees only twenty-two lakhs twenty-eight thousand).
  9. The appellant claims that on November 30, 2012, they sent the respondent an auction notice informing them that the property will be auctioned on December 31, 2012. The notice of the auction sale was published in two newspapers on November 30, 2012. 
  10. The respondent filed a writ petition on December 14, 2012, challenging the auction sale before the Lucknow Bench of the High Court of Judicature in Allahabad. By a decision dated December 20, 2012, the writ petition was dismissed for lack of maintainability.
  11. The respondent disputes that they got served with the notice of the auction on November 30, 2012. Despite having the letter dated November 30, 2012, in its files, the appellant was unable to present any documentation proving actual service. 
  12. During the hearing, the respondent has stated that he entered into an agreement with Respondent No. 3 in these appeals, Abdul Haleem Siddiqui, for the sale of the property for Rs. 29,00,000/- (rupees twenty-nine lakhs only), and that he had received an advance of Rs. 1,00,000/- (rupees one lakh only), who later has said to be present in the auction. and he gave the highest bid of Rs.42,00,000/-(rupees forty-two lakhs only) which was accepted by the appellant.

Issues Raised

  • Questions were raised about whether it was appropriate for the appellant to return the cheque after the respondent had submitted a cheque for Rs. 6,23,809 (six lakhs twenty-three thousand eight hundred nine only) and sent a letter to the appellant indicating their desire to pay. However, in answer, the responder was told that the entire sum owed was Rs. 19,30,995/-, or just Rs. 19 lakhs thirty thousand nine hundred ninety-five. 
  • Another question posed was whether the respondent’s writ petition challenging the auction sale was appropriate and if he could recover damages from the bank for selling his property that had been kept as a mortgage.

Contention of the Appellant

The appellant contended that the respondent, who has not repaid his two-lakh rupee loan, is now responsible for paying the outstanding sum, which has escalated to Rs. 6,23,809, as per Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

Following nonpayment, the appellant was forced to seize the mortgaged property and bring it to auction. Once the appellant eventually seized ownership of the land, an inventory of the immovable assets was created. Rule 9(1) of the Security Interest (Enforcement) Rules, 200211 states that it is required to serve the owner of the mortgaged property with a notice of auction in accordance with Rules 8 and 9 of the 2002 Rules. 

Nevertheless, the appellant claims that on November 30, 2012, they sent the respondent an auction notice informing them that the property will be auctioned on December 31, 2012. On November 30, 2012, two publications carried notices of the auction sale itself. 

Contentions of the Respondent

Regarding the respondent, he states that he sent a cheque for Rs. 6,23,809/- (rupees six lakhs twenty-three thousand eight hundred nine only) and that he had sent a letter to the appellant expressing his desire to pay. still the appellant gave him back the cheque and continued with the auction.

Later, the respondent contested the auction notice’s service, claiming that he never received it from the appellant and that this was against Rule 9(1) of the Security Interest (Enforcement) Rules, 2002. He demanded compensation from the appellant, arguing that this rendered the sale unlawful.


The respondent was fully aware of the auction notice dated November 30, 2012, the court concluded, based on the facts of the matter at hand. He was aware of the auction notice from earlier and had filed a writ petition before the High Court within 14 days of that. Additionally, he had a contract with Abdul Haleem Siddiqui, who would eventually buy the auction. When the auction took place, the respondent was in attendance. In addition, as was already mentioned, there is no evidence that the appellant served the respondent with a notice dated November 30, 2012. The appellant did not keep accurate records of the notice’s service, which suggests to the court that there was a failure on their behalf. In addition, the respondent was fully aware of the notice and the auction procedure, which the court cannot ignore.

Therefore, considering the facts and in accordance with court’s authority under Article 142 of the Indian Constitution, the supreme court order the appellant, i.e. Bombay Mercantile Cooperative Bank, to pay the respondent a sum of Rs. 54,00,000/-12 (rupees fifty-four lakhs alone) as a complete and final settlement of his claims. Five weeks will pass after a copy of this order is received before this payment is processed. Within a week from now, the appellant’s attorney will receive information about the respondent’s bank account, where the money can be electronically deposited. If the appellant fails to make payment within the specified timeframe, they will be responsible for paying interest on Rs. 54,00,000/-from the date of this order to the date of actual payment, at a rate of 12% (twelve percent) annually. 


As per Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 – If a borrower, who is obligated to a secured creditor under a security agreement, defaults on any instalment of the secured debt and the secured creditor classifies the borrower’s account as a non-performing asset, the secured creditor may, by written notice, require the borrower to fully discharge his obligations to the secured creditor within sixty days of the notice date; if this is not done, the secured creditor may exercise all or any of the rights under sub-section (4). 

Provided that—

  1. A borrower who has received money through the issuance of debt securities shall not be subject to the obligation of classifying secured debt as a non-performing asset under this subsection.
  2. Additionally, in case of default, the debenture trustee will have the right to enforce the security interest in line with the terms and conditions of security documents executed in the trustee’s favour, and in the same manner as specified by this section with any modifications that may be required.

The respondent has cited in this Court’s ruling in Mathew Varghese v. M. Amritha Kumar & Ors.10, which interpreted Rule 9(1) of the Security Interest (Enforcement) Rules, 2002. This rule states that no immovable property sale under these rules may occur before the thirty-day period ends after the date on which the notice of sale has been served to the borrower or the public notice of sale is published in newspapers as specified in the proviso to Subsection (6) of Rule 8: Furthermore, if any of the methods listed in subsection (5) of rule 8 are unsuccessful in selling immovable property and a new sale is necessary, the authorised officer will serve, affix, and publish a notice of sale to the borrower for any upcoming sale that will take place at least fifteen days from the date of the initial sale.

Additionally, the Supreme Court has used its authority under Article 142 in rendering a final decision. The Supreme Court is authorised by Article 142 to provide any ruling or directive required to ensure that every case or matter before it is fully tried. These orders or decrees are important weapons for judicial intervention because they are enforceable throughout the territory of India.


The Indian Supreme Court is hearing yet another complicated case. After reviewing all relevant facts and laws, the court concluded that the parties’ contentions were both reasonable and ambiguous, making it difficult to reach a decision in this case. Because of this, the court must use its own set of reasoning while reaching its decision. We saw that when circumstances such as these arose, how Article142 of the Indian constitution had empowered the court to take matters in their own hands.






This Article is written by Anjali S. Raut student at Dr. Ambedkar College of Law, Nagpur: Intern at Legal Vidhiya.

Disclaimer: The materials provided herein are intended solely for informational purposes. Accessing or using the site or the materials does not establish an attorney-client relationship. The information presented on this site is not to be construed as legal or professional advice, and it should not be relied upon for such purposes or used as a substitute for advice from a licensed attorney in your state. Additionally, the viewpoint presented by the author is of a personal nature.


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