Dismissed

K R Mohamed Kasim v. Housing Development Finance Corporation Limited

DRT19 Jul 2022SA/27/2022

Case brief

AI extract

What is this about?

The Tribunal dismissed separate applications challenging a demand notice and a civil magistrate's order under Section 14 of the SARFAESI Act. It held that the financial institution had substantially complied with statutory procedures for notice serving and affixture, and the magistrate correctly examined factual assertions without needing to address legal niceties.

What did the court decide?

SA No.195/2020 and SA No.27/2022 were dismissed and the order of the Civil Magistrate was affirmed.

K R Mohamed Kasim versus Housing Development Finance Corporation… — Cheque Dishonour | DRT (2022)

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IN THE DEBTS RECOVERY TRIBUNAL-I, CHENNAI

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Dated this 19^th Day of July, 2022

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PRESENT: SHRI A.S.JAYACHANDRA

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Presiding Officer

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SA No.195 of 2020 & SA No.27 of 2022

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Mr.K.R.Mohamed Kasim, S/o Mr.Rahamatullah, #1A, Arcot Road, Vadapalani, Chennai – 600026.

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. . . Common Applicant

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Versus

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The Authorised Officer, HDFC Limited, 2^nd Floor, ITC Centre, No.760, Anna Salai, Chennai – 600002.

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Counsel for Applicant Counsel for Respondent

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. . . Common Respondent :- Mr.G.Sanjeevi & Prince :- Mr.K.J.Parthasarathy

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: - COMMON ORDER - :

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Both the applications are filed under Section 17(1) of the SARFAESI Act, 2002. In SA No.195, the applicant challenges the Possession Notice dated 10.12.2020.

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In SA No.27/2022, the Applicant assails the Orders of Ld. CMM, Egmore in Crl.M.P. No.1837/2021 on 29.12.2021 under the provisions of Section 14 of SARFAESI Act. Since the facts leading to the impugned orders and the grounds being common and the defence also identical in both the matters, they are being disposed of by this common order.

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2. Case of the Applicant :-

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Applicant availed the housing loan of Rs.75 Lakhs repayable under EMIs. This was sanctioned in 2015. He had paid certain instalments without any default for some time. The applicant came to know that his account was declared NPA, consequent to delay in repayment of the dues. He pleaded for regularisation of the loan account with the respondent, but to no avail. The bank claims to have issued demand notice and possession notice. The demand notice was not served. Possession Notice was affixed, the same is now challenged in SA No.195/2020.

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In SA No.27/2022, the applicant challenges the order of the Ld. CMM passed under Section 14 (1) & (2) of SARFAESI Act with the same set of facts.

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4. Common Grounds in SA No.195/2020 & SA No.27/2022 :-

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After perusal of the grounds urged in both the applications, the Possession Notice is challenged on the grounds that the demand notice was not served. NPA was declared against the norms and guidelines of RBI. The statutory rights under Section 13(3-A) was impaired. Rule 8(1) & (2) of Security Interest (Enforcement) Rules is not followed. The grounds are replete with repetitions and further stresses that the principles of natural justice were violated and injustice is caused without giving breathing period to the applicant to repay. The acts of the bank is very hasty. The same are the grounds on which the orders of the Ld. CMM, Egmore, is also questioned.

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5. Version of the Respondent :-

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The Respondent financial institution had filed their separate counter along with the documents to answer the grounds urged in both the petitions. Their common say in reply to the allegations are:-

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(a) Loan of Rs.75 Lakhs was sanctioned upon agreement dated 30.10.2015, repayable under 180 EMIs @ Rs.78,998/- along with the interest.

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(b) Applicant executed the mortgage by way of deposit of title deeds on 15.02.2016 registered as document No.664/2016 before the jurisdictional registering authority, as a security.

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(c) Upon failure to adhere to the monthly instalments, the bank followed NPA norms and issued recall notice dated 18.02.2020.

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(d) The demand notice under Section 13(2) was issued 08.06.2020 extending sixty days time. The same was returned un-served. Therefore it was affixed at the last known address of the applicant on 09.06.2020.

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(e) Publications were effected on 18.06.2020 in Deccan Chronical and Dinakaran newspapers complying Rule 3 of the Security Interest (Enforcement) Rules, 2002.

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(f) Since demand notice is not complied, possession notice under Section 13(4) of the Act was issued. The same was affixed. Publication was also carried out in New Indian Express and Dinamani on 15.12.2020.

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(g) The Applicant suppressed material facts regarding the due amount as on 28.02.2022 is Rs.1,02,16,736/-.

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(h) It is also contended that all the measures taken by the respondent is strictly in accordance with the procedures laid down under the Rules and the Act.

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(i) The applicant had also not complied the interim directions given to him by the Tribunal.

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In the counter, filed in SA No.27/2022 prayer is specifically opposed on the same grounds and emphasised that the interim orders passed in SA No.195/2020 dated 19.12.2020 is not complied by the applicant and this fact is suppressed in SA

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No.27/2022. The mortgage is duly registered with the Central Registry as per Section 26D of the SARFAESI Act even though the implementation of Section 20 to 26 was notified only on 26.12.2019 and that the mortgage is prior to the implementation of the provisions. Reliance is placed on the ruling of the Hon’ble Apex Court in Standard Chartered Bank Vs. Nobel Kumar reported in SCC (2013) (9) P620 to show that there is no legal binding to comply Rule 8 of the Security Interest (Enforcement) Rules to invoke the jurisdiction of SARFAESI Act. The Officials came to know that one Mr.N.Raju is occupying the secured asset only when they visited on 28.02.2022. Therefore, it is submitted that the application be rejected.

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The Respondent had filed certain documents along with the counter in both the matters. They relied on the copies of notices and its return, subsequent affixtures, the returned envelopes and the publications carried out in compliance of the Rules.

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The Ld. Counsel for the applicant had gone through the detailed counter and the documents relied by the Respondent. It was argued by the Ld. Counsel for the applicant that the affixture of notices is even prior to the return of the envelopes sent through post. The overzealousness on the part of the respondent is a clear irregularity according to the applicant.

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On the other hand the Ld. Counsel for the Respondent argued that all the statutory provisions have been complied and that the demand notice was sent by RPAD. By way of an abundant caution under Rule 8(3) of the Security Interest (Enforcement) Rules, the affixture was carried out. The precautionary steps taken by the respondent for compliance of Rules cannot be faulted with.

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9. Points for determination :-

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The common point that arises for determination in both the applications is “Whether the measures taken by the Financial Institution challenged in the application is opposed to the provisions of SARFAESI Act and the rules framed under the Security Interest (Enforcement) Rules 2002.”

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10. Answers to the Point for determination in SA No.195/2020 :-

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The Possession Notice dated 10.12.2020 is challenged in SA No.195/2020. It is seen from the list of documents produced by the Respondent, the demand notice is sent, which is dated 08.06.2020 at three addresses of the applicant narrating the reminders and demands informing that the recall notice was issued on 18.02.2020, for the failure to comply with the EMIs. The said demand notice specifically notified that the loan account was classified as Non Performing Asset. The same was either unclaimed at one address, another address was returned with remark left without instructions. Therefore the same was affixed at the last known address and publications were also effected in two newspapers dated 18.06.2020. This is in accordance with Section 13(2) and Rule 3. Had if the applicant received the notices, he had a chance to comply Section 13(3-A). This Tribunal does not see any illegality in issuing the demand notice. The affixture is also carried out by way of abundant caution. The argument that the affixture of notices even prior to the postal envelopes getting returned is an irregularity, cannot be accepted since the Respondent had made every endeavour to see that the provisions of Section 13 is complied. Section 13(2) is the provision to notify the borrower that the secured creditor would be entitled for all or any of the rights under Section 13(4) in case of non-compliance of the discharge of the debt. The Rule 3 of the Security Interest (Enforcement) Rules, 2002 speaks of delivering or transmitting at the place the said notice. It has a provision for the authorised officer having reason to

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believe that the borrower cannot be served in the manner, the same be effected by affixing a copy of the same on the outer door or other conspicuous part on the house in which the borrower or his agent ordinarily resides and also by publishing the contents of the demand notice in two leading newspapers including one in vernacular language. The sub-proviso attached to Rule 3(1) does not prohibit the affixture prior to the return of the postal envelopes. In the light of the above provisions, the service of demand notice and the affixture cannot be said as violative of Rule 8(3). The applicant had not availed the statutory period provided under Section 13(3-A) for representation in which he could have questioned the classification of NPA which he alleges belatedly in the instant proceedings. After going through the records furnished by the Respondent, the grounds urged remain unsubstantiated. Therefore the action of the respondent in issuing the demand notice and subsequent possession notice under Section 13(4) cannot be said to be not in accordance with law.

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11. Points for determination in SA No.27/2022 :-

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The grounds urged are almost similar as that of the grounds raised in SA No.195/2020. The tenability of demand notice and the questioning of NPA is already discussed above. What is specifically urged to challenge the action of the Respondent in approaching the Ld. CMM, Egmore is that Rule 3 is violated. Rule 3 speaks of the manner of delivery of demand notice, which discussion would be at the cost of repetition. The same is already discussed.

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The Ld. Counsel for the Respondent had relied on Standard Chartered Bank (Supra) . It is guided by the Hon’ble Apex Court that the Magistrate is required to examine factual correctness of assertions made in the affidavit, but not legal niceties of

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transaction. Only after recording the satisfaction, the Magistrate may pass appropriate orders regarding taking of possession of the secured asset.

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In the instant case, the order of the Ld. CMM is perused. The Ld. CMM had noted that the petitioner in CMP No.1837/2021 had filed an affidavit in support of the petition under Section 14 of the SARFAESI Act and the necessary documents were also produced. The Ld. CMM was of the opinion that the contents in the affidavit are sufficient to satisfy the court to exercise the powers and to pass an order. Paras 4 & 5 of the impugned order does not require any legal niceties to be discussed at length. The order of the Ld. CMM cannot be held as perverse and opposed to the provisions of the SARFAESI Act.

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