Dismissed

Mr. Imtiyaz Mukadam v. Kokan Mercantile Co-operative Bank Ltd. & Ors.

DRAT12 Feb 2024REGULAR APPEAL/173/2014

Case brief

AI extract

What is this about?

The Debts Recovery Appellate Tribunal dismissed an appeal against an order dismissing a Securitisation Application challenging an auction sale of secured agricultural land. The Tribunal held the appeal barred by limitation as the appellant raised no objections during the process and could waive statutory rules.

What did the court decide?

No reason to interfere with the impugned order dismissing the Securitisation Application.

Mr. Imtiyaz Mukadam versus Kokan Mercantile Co-operative Bank… — Banking and Recovery | DRAT (2024)

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BEFORE THE DEBTS RECOVERY APPELLATE TRIBUNAL, AT: MUMBAI Present: Mr Justice Ashok Menon, Chairperson Appeal No. 173/2014

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Between

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Imtiyaz A Kadir Mukadam … Appellant/s V/s.

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Kokan Mercantile Co-operative Bank Ltd. & Ors. …Respondent/s

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Mr Dileep S., Advocate for Appellant.

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Mr Rishabh Shah along with Mr Harjot Singh Alang, i/b M/s RavalShah & Co., Advocate for Respondent No.1. Ms Sonali Jain, Advocate for Respondent No. 2.

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Order dated: 12/02/2024:-

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The Appellant is a borrower (guarantor) of the 1^st Respondent Konkan Mercantile Co-Operative Bank Limited and the Applicant in Securitisation Application (S.A.) No. 249 of 2011 filed under section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act”, for short) on the files of the Debts Recovery Tribunal-III, Mumbai (D.R.T.) who has preferred this appeal impugning the order dated 21/08/2012 of the D.R.T. dismissing the S.A.

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The Appellant’s brother had availed several credit facilities from the Respondent bank and defaulted repayment. The Appellant was one of the guarantors. The bank issued a demand notice under section 13 (2) of the SARFAESI Act to the borrower and the Appellant on 18/10/2007 demanding repayment of the debt due. The Appellant had approached the bank and undertook to repay the amount in case his brother failed to repay it. Consequently, the Sarfaesi action against

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the secured assets was proceeded against. Symbolic position was taken under section 13 (4) on 21/11/2008. The physical possession of the properties was handed over to the bank voluntarily by the borrower on 25/11/2008. The properties were put up for sale in public auction by notice dated 15/12/2010 and the sale was conducted on 31/12/2010. Respondents Nos. 2 and 3 purchased the properties for ₹63 lakhs. The sale was confirmed in the Sale Certificate was registered on 22/09/2011. The possession of the properties was also handed over to the auction purchasers.

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The Appellant filed the aforesaid S.A. on 28/09/2011 challenging the registration of the Sale Certificate and seeking to set aside the auction sale. The Appellant raised contentions challenging the sale on the ground that the properties proceeded against were agricultural land and would not come within the purview of the SARFAESI Act by the exemption granted under section 31 (i). That apart, it is also contended that the sale was conducted without obtaining a valuation certificate and fixing the reserve price as required under Rules 8 (5), 8 (7) (b) and 9 (2) of the Security Interest (Enforcement) Rules, 2002 (“Rules”, for short).

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The secured creditor as well as the auction purchasers contested the S.A. and contended that there was no violation of any rules and also raised the contention that without challenging the Sarfaesi measures, the Sale Certificate cannot be set aside. It was also contended that the S.A. is barred by limitation.

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In the impugned order, the Ld. Presiding Officer observed that though the rules were infringed, the Appellant did not approach the D.R.T. within 45 days and challenge the measures taken by the

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Respondent bank and hence the S.A. is barred by limitation.

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Aggrieved and dissatisfied with the judgment and order passed by the D.R.T. dismissing the S.A., the Appellant filed this appeal. 7. Heard the Ld. Counsel appearing for the Appellant, Mr Dileep S. and Mr Rishabh Shah for the creditor and Ms Sonali Jain for the auction purchasers. Records perused. 8. The Appellant is one of the co-owners and mortgagors of the secured assets. Demand notice under section 13 (2) was also served on him. No objection whatsoever was raised. Admittedly, the Appellant had approached the bank and undertook to repay the entire outstanding dues in case his brother, the principal borrower, failed to repay the amount. Symbolic possession of the secured asset was thereafter taken by the creditor and physical possession of the properties was voluntarily handed over to the bank on 25/01/2008. The sale notice was published on 15/12/2010 and no objection was forthcoming from the borrower or the mortgagors including the Appellant. No objection regarding the insufficiency of the reserve price was raised by any of the mortgagors or the borrower. The properties were sold to Respondents Nos. 2 and 3 for ₹63 lakhs and yet no objection was forthcoming. The Sale Certificate was registered on 22/09/2011 and possession of the properties was handed over to the auction purchasers. Only then did the Appellant file the S.A. challenging the sale. Neither the principal borrower nor the other comortgagors raised any challenge to the sale of the properties.

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The Ld. Counsel appearing for the auction purchasers, Ms Sonali Jain has relied upon the decision of the Hon’ble Supreme Court in Shri Siddeshwara Co-Operative Bank Limited vs. Ikbal (2013) 10 SCC 83 to

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argue that even though the rules are mandatory, it can always be waived by a party for whose benefit such provisions have been made. In the above-cited decision, there was an allegation regarding noncompliance with Rule 9(1) of the SARFAESI Act.

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The next objection that is raised by the Appellant is that given section 31 (i) of the SARFAESI Act, the properties were agricultural lands and the same being exempted from the provisions of the Act, could not be proceeded against for recovery of the debt. Mr Rishabh Shah relies upon the decision of the Hon’ble Supreme Court in K. Shreedhar vs. M/s Raus Constructions Pvt. Ltd. 2023 SCC OnLine 13 to argue that the burden was upon the borrower to prove that the secured properties were agricultural lands and being used as agricultural lands and/or agricultural activity was going on. Relying upon decisions of the Hon’ble Supreme Court in ITC Limited vs. Blue Coast Hotels Ltd. & Ors (2018) 15 SCC 99 and Indian Bank & and Ano. vs. K. Pappireddiyar & Ano. (2018) 18 SCC 252 it was held that the classification of land in revenue records as agricultural is not dispositive or conclusive of the question whether the SARFAESI Act does or does not apply. Whether a parcel of land is agricultural must be deduced as a matter of fact from the nature of the land, the use to which it was being put on the date of the creation of the security interest and the purpose for which it was set apart.

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Mandatory provisions of law are created for the protection of the borrowers and they can therefore waive those provisions. The Appellant did not raise any objection regarding the non-fixing of the reserve price, the inadequacy of the sale price, or the inadequacy of the notice that was issued. It is also pertinent to note that on 13/01/2011,

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the creditor bank informed the borrower that the sale of the property would proceed with a sale price of ₹63 lakhs unless the borrower succeeded in bringing a better offer. On 27/05/2011 yet another letter was issued by the bank to the borrower stating that the sale would be confirmed for ₹63 lakhs if there was no response from the borrower. No response whatsoever came from the borrower or the mortgagors. Hence, the creditor bank proceeded to confirm the sale and issue the Sale Certificate.

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The mortgagors including the Appellant did not raise any objection to the procedures and rules and therefore, they have expressly waived their right to challenge those measures. Moreover, except for the challenge of the registration of the sale deed, the other challenges have all become barred by limitation. There is no application filed by the Appellant to condone the delay in filing the S.A. Hence, I find no reason to interfere with the impugned order.

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The appeal is without any merits and is, therefore, dismissed.

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mks-01

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Sd/Chairperson

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Mr. Imtiyaz Mukadam v. Kokan Mercantile Co-operative Bank Ltd. & Ors.

Case brief

What is this about?

What did the court decide?

Mr. Imtiyaz Mukadam v. Kokan Mercantile Co-operative Bank Ltd. & Ors.

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

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