Dismissed

Mrs Shehanaz Siraz Gunaki v. South Indian Bank

DRT22 Jul 2022SA/41/2022

Case brief

AI extract

What is this about?

The Tribunal dismissed the Securitization Application filed by a loan defaulter challenging the bank's possession letter and an order under Section 14 of SARFAESI Act. The court held the applicant failed to prove procedural illegality or establish that the District Magistrate was functus officio.

What did the court decide?

Impugned letter dated 07.01.2022 and Order dated 08.05.2019 under Section 14 of the Act are upheld; SA dismissed.

Mrs Shehanaz Siraz Gunaki versus South Indian Bank — Banking and Recovery | DRT (2022)

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IN THE DEBTS RECOVERY TRIBUNAL II, KARNATAKA AT BENGALURU

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Date:22nd day of July 2022

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Present: SMT. S. V. GOWRAMMA

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Hon`ble Presiding Officer

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SA No.41/2022

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BETWEEN:

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Mrs Shehanaz Siraz Gunaki, W/o. Late Prashuram Mallappa Bendigeri, R/at Plot No.2779, (CTS) 2292, BUDA, Ramthirth Nagar, Kanabargi, Belagavi 590 016. … APPLICANT

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AND

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The Authorized Officer South Indian Bank Ltd., Belagavi Branch, Plot No.8, High Street, Havelock Road, Belagavi 590 001. ... RESPONDENT …….

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Counsels on record/appeared for:

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Applicant : Sri M.A. Rajendra Respondent : Sri Narayana Shenoy …….

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FINAL ORDER ON SA

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The present Securitization Application is filed under sub section[1] of S.17 of the Securitization And Reconstruction of Financial Assets and Enforcement of Security Interest Act,2002 (for short the ‘Act’) challenging the action and the measure taken

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2 S.A. No.41/2022

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by the secured creditor under the Security Interest [Enforcement Rules, 2002 [for short the Rules 2002].

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The Letter dated 07.01.2022 by Respondent Bank and the Order passed by the Ld. Deputy Commissioner & District Magistrate, Belagavi dated 08.05.2019 in Crl.isc No.RRC/SEC/CR169/2018-19 are impugned in the present SA.

¶17

The facts leading to filing of the present SA as put forth by the Applicants are that the applicant was an employee of Karnataka State Road Transport Corporation as Second Division Assistant and the schedule property was purchased by applicant from BUDA bearing Site No.1779. Applicant availed a Housing Loan of Rs.36 lakh from respondent bank, sanctioned on 15.07.2016, for purchasing the schedule property.

¶18

The applicant was implicated in a misappropriation case and her services were terminated on 05.01.2016, which was challenged before the Labour Court at Hubballi. As the Appeal was dismissed, applicant challenged the said Order before the Hon’ble High Court of Karnataka, Dharwad Bench in WP No.103220/2021, which is pending adjudication. As the services since terminated, her gratuity and PF amount is withheld by her employer, she could not be able to service the loan as per schedule and hence the

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3 S.A. No.41/2022

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account was classified as Non-Performing Asset on 15.04.2018 claiming a sum of Rs.36,46,789/- as on 15.05.2018 plus interest.

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The respondent bank issued Possession Notice dated 11.09.2018, which the applicant challenged before this Tribunal in SA No.317/2018, which came to be dismissed on 06.08.2021. In the mean time, the respondent bank approached the Deputy Commissioner & District Magistrate, Belagavi u/s 14 of the Act to take physical possession of the property where the applicant with family members are residing and tenants are also in occupation of the premises. The Deputy Commissioner & District Magistrate, vide Order No.RRC/SEC/CR-169/2018-19 dated 08.05.2019 has ordered the Assistant Commissioner, Belagavi to execute his order (ANNEXURE-A2). It is submitted that, in the meantime, applicant lost her husband on 21.05.2021. Applicant also underwent a surgery and a copy of the Discharge Summary report is produced as ANNEXURE-A4.

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Applicant requested the Deputy Commissioner/Assistant

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Commissioner to defer the action of taking physical possession of the property, copy of the letter is marked as ANNEXURE-A5. The Deputy Commissioner, considering the request of the applicant, directed the Authorised Officer of the respondent bank

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to defer the action vide his order dated 15.11.2021 (ANNEXUREA6). The respondent bank, in spite of the instructions of the Deputy Commissioner, Belagavi, who himself modified his own orders, issued a letter dated 07.01.2022 to the applicant to handover possession of the schedule property. Applicant approached the Hon’ble High Court of Karnataka, Dharwad in WP No.100178/2022 but the said petition was dismissed giving liberty to approach the Debts Recovery Tribunal, Bengaluru which is alternate remedy. Hence this SA has been filed before this Tribunal.

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In the grounds of the SA, it is contended that the bank cannot initiate measures under the Act unless the Bank’s interest/charge registered with the Central Registry. The delegation of powers by Assistant Commissioner to his subordinates, the Tahsildar and concerned officers of Revenue Department is not known to law.

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It is contended by applicant that, when the Deputy Commissioner & District Magistrate modified his own order in withholding the execution of the order, unfortunately, the Assistant Commissioner nor the respondent bank adhering to the instructions given by their own competent authority, has passed

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5 S.A. No.41/2022

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the order. The respondent bank cannot issue the letter dated 07.01.2022 who do not have any powers/ locus standi when the Deputy Commissioner entrusted his subordinate. There is no provision u/s.14 of the Act entrusting the secured creditor to take physical possession and hence the letter dated 07.01.2022 is liable to be set aside (ANNEXURE A1).

¶30

The respondent bank, without giving an opportunity to the applicant to settle the dues under OTS/Compromise Settlement despite requests, opted to proceed further under the Act for recovery of public money. The repayments made by applicant has not been properly accounted/appropriated and the amount claimed by bank is much more than the legally recoverable debt, which needs to be recalculated. The applicant is willing to redeem the mortgage created over the schedule property by paying justifiable and legally payable dues to bank.

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On these grounds, the applicant prayed to set aside the measures taking possession and conducting auction sale of the property based on the letter dated 07.01.2022 and Order dated 08.05.2019 passed by the Deputy Commissioner & District Magistrate, Belagavi.

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Objections filed by respondent bank, in brief:

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The respondent bank filed statement of objections inter-alia contending that the SA is not maintainable either in law or on facts. Applicant was granted Housing loan of Rs.36,00,000/- vide Sanction Intimation Letter dated 14.07.2016. Applicant failed and neglected to service the loan and defaulted in complying with terms and conditions of the loan agreement despite repeated letters and reminders from respondent bank. The account was declared as Non-Performing Asset (NPA) on 15.04.2018 as per the extant guidelines laid down by Reserve Bank of India.

¶35

Demand Notice u/s 13(2) of the Act was issued on 28.05.2018 to the Applicant and late Parshuram Mallappa, husband of the applicant by Registered Post, calling upon the borrowers to pay the same within 60 days. The notice was duly delivered to the applicant and her husband. The respondent has neither received any reply nor objection u/s 13(3A) of the Act. As the applicant failed to repay the dues, as per S.13(4), the Authorised Officer took symbolic possession of the secured assets by affixing the possession notice on the outer wall of the secured assets.

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7 S.A. No.41/2022

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It is pertinent to mention here that the said facts are briefly stated and documents not produced by bank since they have been the subject of adjudication in SA 317/2018, which was allowed in favour of the respondent bank vide order dated 06.08.2021, copy produced as Annexure R1. An application to recover an amount of Rs.41,41,986/- with further interest and costs has also been filed vide OA No.954/2019, which is pending trial.

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It is further submitted by the respondent bank that the contentions of the applicant regarding her implication in a false misappropriation case, termination of her service on 05.01.2016, the challenge before the Labour Court, Hubballi and the challenge to the order of Labour Court before Hon’ble High Court in WP No.103220/2021 pending adjudication are extraneous to the case on hand and cannot be gone into in the adjudication of an SA.

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It is true that the applicant challenged the possession notice dated 10.10.2018 (wrongly mentioned as 11.09.2018) before this Tribunal, which was dismissed on 06.08.2021. The applicant failed to handover peaceful possession of the property to the respondent and therefore the respondent was constrained to apply for an order u/s 14 of the Act from the Ld. District Magistrate and it was allowed vide order dated 08.05.2019. It is true that the Ld. District

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Magistrate ordered the Assistant Commissioner, Belagavi to execute the order. This cannot be seen as any delegation of any essential function. The essential part of S.14 of the Act is, an order granting police assistance is already passed on 08.05.2019 by the Ld. District Magistrate and the physical act of taking possession/handing over the same to bank is caused through the Tehsildar and there is no question of delegation of powers to the Tehsildar in this case. The Revenue Officer being called upon to execute the Order cannot be, by any means, called delegating the authority.

¶42

The contentions of applicant that she lost her husband and she had undergone surgery are regrettable but at the same time, it may be seen that sufficient time given at every such juncture to see off the loans but she failed to comply such opportunities. The request to Deputy Commissioner to defer the action of taking physical possession by writing a letter dated 10.11.2021 is only a half story; since 2019, applicant wrote several letters and brought all sorts of pressure on the office of Ld. District Magistrate and his deputies to ward of the efforts of the bank to take physical possession of secured assets using police assistance and that the letter dated 15.11.2021 purportedly issued by the Ld. District Magistrate does not bear the office seal, must be viewed

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sceptically and the bank is not served with a copy of the same by Office of the District Magistrate. The letter stated that the applicant may be afforded an opportunity by way of one-time settlement. But the respondent has not received any one-time settlement proposal from the applicant and no OTS proposal is pending before the respondent bank. Further, the letter dated 15.11.2021 has not superseded the order dated 08.05.2019.

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It is denied that the Ld. District Magistrate modified his own order and withheld the execution of the order dated 08.05.2019. It is to be noted that the Ld. District Magistrate has no powers to withhold the execution of the order. Once an order is passed u/s 14 of the Act, the office of the District Magistrate becomes ‘ functus officio ’. The contention that the bank cannot issue the letter dated 07.01.2022 is without merits. In this regard, the reply given by the Respondent bank that the applicant has not paid a single rupee from the past four years and no OTS proposals are pending before the respondent bank and that the applicant is dragging the matter on one pretext or the other deserves consideration. Further, the respondent bank averred that the letter is paved with good intentions and issued in accordance with the order of the Ld. District Magistrate and not in derogation of it.

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S.A. No.41/2022

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The respondent bank has not registered their charge over the schedule property with the Central Registry, without complying this mandatory requirement, the respondent bank cannot proceed against the schedule property.

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Applicant contended that she is willing to redeem the mortgage by paying justifiable and legally payable dues to the respondent bank. It is to be noted that, in the OA 954/2019 filed by Bank, despite service of notice, the applicant failed to participate in the proceedings. Invaluable time of the Tribunal is being wasted without there being any reason to do so. Hence, the contention deserves no mercy.

¶50

It is pertinent to mention here that the Applicant has created encumbrance over the secured assets mortgaged to respondent bank by way of a registered sale agreement dated 08.08.2016 favouring one Iswar Muttappa Suganthi, registered as BEL-106855/2016-17 in the O/o.Sub-Registrar, Belagavi. This aspect has also been noted in the Orders passed by this Hon’ble Tribunal in SA 317/2018 and the SA stood dismissed against the applicant.

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The applicant is duty bound to discharge his liability and the respondent has duly issued S.13(2) Notice, S.13(4) Notice, carried out newspaper publications of Possession Notice in English and

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vernacular languages. However, the applicant did not respond. Further, this Hon’ble Tribunal has passed a detailed order dated 06.08.2021 (copy produced as Annexure R1) in SA 317/2018 which was filed against the possession Notice and the SA was allowed in favour of the respondent bank as the applicant failed to establish any illegalities/violation of procedures in the measures initiated by bank under the Act.

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Therefore the above facts indicate the lackadaisical approach of the applicant and filing of SA just to defeat the recovery of huge dues by respondent bank. Respondent bank prays that the SA is not sustainable and liable to be dismissed with exemplary costs.

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Heard the submissions of both the counsels and perused the records.

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At the outset, there is no denial regarding the availing of loan, mortgage of property as collateral security towards the loan availed by applicant and the default committed in repaying the loan by applicant. The applicant along with one-Parashuram Mallappa Bendigeri has already filed SA 317/2018 challenging the Possession Notice issued by respondent bank dated 10.10.2018 before the Debts Recovery Tribunal-II, Bengaluru. The said SA filed by the applicant was dismissed on 06.08.2021 by a detailed

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order, upholding the measures taken by respondent bank under the Act.

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The present SA has been filed by Applicant to set aside the recovery measures by respondent bank based on the impugned letter dated 07.01.2022 and the order dated 08.05.2019 passed by Ld. Deputy Commissioner & District Magistrate, Belagavi u/s 14 of the Act.

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According to the applicant, applicant’s husband died on 21.05.2021 and the applicant underwent a surgery (Copy of Discharge Summary produced as Annexure A4) and hence requested the Deputy Commissioner to defer the action of taking physical possession of the property (Copy of Request letter produced as Annexure A5). The Deputy Commissioner directed the respondent bank to defer the action vide order dated 15.11.2021 (photocopy produced as Annexure A6, not a certified copy) but the respondent bank issued a letter dated 07.01.2022 (Annexure A1) to the applicant to handover possession of the schedule property. Applicant preferred Writ Petition in WP No.100178/2022 before the Hon’ble High Court of Karnataka, Dharwad but the same was dismissed giving liberty to the Applicant to approach the Debts Recovery Tribunal.

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13 S.A. No.41/2022

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On the contrary, respondent bank averred that the letter dated 15.11.2021 purportedly issued by District Magistrate does not bear the office seal, must be viewed skeptically and the bank is not served with a copy of the same by the Office of the District Magistrate. Once an order is passed u/s 14 of the Act, the Office of the District Magistrate becomes functus officio . The letter stated that the applicant may be afforded an opportunity by way of onetime settlement. Further, it is averred by respondent bank that the bank has neither received any one-time settlement proposal from the applicant nor any settlement proposal is pending. Further, the applicant has not paid a single rupee from the past four years and the applicant is dragging the matter on one pretext or the other. Further, the Letter dated 07.01.2022 issued by bank is in accordance with the Order of the Ld. District Magistrate and not in derogation of it.

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Though the applicant alleged that she has not been given an opportunity to settle the claim, failed to prove that she has submitted the settlement proposal to settle the subject loan account but the same has not been considered by respondent bank. Therefore, there is no substance in the allegation and deserves to be rejected.

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14 S.A. No.41/2022

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It is alleged that the bank has not properly accounted/ appropriated the amounts repaid by applicant. Again, the applicant failed to substantiate this allegation with any specific proof or material evidence by way of challan, receipt etc. for having repaid the loan amount but not reflected in the account. In the absence of any such proof or evidence, the veracity of the claim cannot be probed into and hence the allegation fails.

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It is alleged by applicant that the delegation of powers by Assistant Commissioner to his subordinates, the Tahsildar and concerned officers of Revenue Department is not known to law.

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An Order of Ld. District Magistrate granting police assistance has already been passed on 08.05.2019 and the act of taking possession/handing over the property to Bank is caused through the Tahsildar. The Revenue Officer or the Officer concerned being called upon to execute the Order cannot be, by any means, called delegating the authority.

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Countering the allegation of applicant regarding the nonregistration of charge with Central Registry as per S.26D of the Act, the respondent has produced the Asset ID and CERSAI Asset Creation Challan as Annexure R4. Hence the allegation falls to the ground.

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Yet another contention raised by the applicant is that the applicant is willing to redeem the mortgage by paying justifiable and legally payable dues to respondent bank. It is to be noted that, in the OA 954/2019 filed by Bank, despite service of notice, the applicant failed to participate in the proceedings. Further, if the applicant is really willing to settle the claim and redeem the mortgage, nothing prevented the applicant from settling the loan account by paying the legitimate dues to the respondent bank and to redeem the mortgage. Further, the respondent bank made it clear that the applicant has neither submitted any one-time settlement proposal nor any such proposal is pending for consideration.

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It may not be out of place to mention here that the Applicant has created encumbrance over the secured assets mortgaged to respondent bank by way of a registered sale agreement favouring one Iswar Muttappa Suganthi, registered as BEL-1-06855/2016-17 in the Office of Sub-Registrar, Belagavi. This aspect has also been noted in the Orders passed by the Tribunal in SA 317/2018 and the SA stood dismissed against the applicant.

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In the present SA, it is stated that the Applicant

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(Smt.Shehanaz Siraz Gunaki) lost her husband (Late Parshuram

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16 S.A. No.41/2022

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Mallappa Bendigeri) on 21.05.2021. A Memo has been filed by Applicant on 29.03.2022 enclosing therewith a copy of Death Certificate of Parashuram Mallappa Bendigeri issued by the Chief Registrar of Births and Deaths, Government of Karnataka. As per the Death Certificate, the wife’s name is mentioned as Vaishali Bendigeri.

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Keeping in view the facts and circumstances of the case and on careful perusal of the documents and submissions made by both the parties, this Tribunal concludes that the applicant failed to establish any legal infirmity or non-compliance of the procedures or provisions of the Act in the present SA. On the other hand, the respondent bank has rebutted the contentions raised by the applicant in the SA and substantiated their case.

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Furthermore, as per S.14(3) of the Act, no act of the Chief Metropolitan Magistrate or the District Magistrate [any officer authorised by the Chief Metropolitan Magistrate or District Magistrate] done in pursuance of this section shall be called in question in any Court or before any authority. The relevant portion of S.14 is produced hereunder:

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14. Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of secured asset -

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(2) … … …

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17 S.A. No.41/2022

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(3) No act of the Chief Metropolitan Magistrate or the District Magistrate [any officer authorised by the Chief Metropolitan Magistrate or District Magistrate] done in pursuance of this section shall be called in question in any Court or before any authority.

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For the foregoing reasons, the present SA is liable to be dismissed. Accordingly, the SA 41/2022 is dismissed. Consequently, the interim order granted, if any, stands vacated. Pending Interlocutory Applications, if any, are disposed of in terms of this order. No order as to cost.

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(Dictated to the PS, after its transcription and necessary corrections, Order signed by me on this 22nd day of July, 2022)

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Sd/-

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PRESIDING OFFICER DRT-2, BENGALURU

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APPENDIX

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LIST OF DOCUMENTS PRODUCED BY THE APPELLANT

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Sl No.	Particulars	Page Nos.	Anne -xure
01	Copy of the impugned Letter dated 07.01.2022	23	A1
02	Copy of DC Order dated 08.05.2019	24	A2
03	Copy of Order from the Office of the Senior Assistant Commissioner, Belgavi Sub-Division, Belgavi	25-26	A3
04	Copy of the Hospital Discharge Summary Report	27-28	A4
05	Copy of the request letter dated 10.11.2021 from the Applicant to the Commissioner, Belagavi.	29	A5
06	Photocopy of the order from the Office of the Deputy Commissioner and District Magistrate, Belagavi dated 15.11.2021	30	A6

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18 S.A. No.41/2022

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LIST OF DOCUMENTS PRODUCED BY THE RESPONDENT

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Sl No.	Particulars	Page Nos.	Anne -xure
1	Copy of the Order 06.08.2021 passed by Debts Recovery Tribunal-II, Bengaluru in SA No.317/2018	12-24	R1
2	Claim sheet from the date of filing the OA i.e., for the period 04.06.2019 to 31.01.2022 reflecting unaccrued interest	25	R2
3	Online copy of the Order dated 19.01.2022 in WP No.100178/2022 passed by Hon’ble High Court of Karnataka, Dharwad Bench	26-27	R3
4	CERSAI Security Interest Creation Challan	28	R4

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Sd/- PRESIDING OFFICER DRT-2, BENGALURU

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19 S.A. No.41/2022

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K/Attn:

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No translation copy of Letter dated 15.11.2021 is available

¶96

IA 179/2022 filed by Resp.Bank to vacate interim order is pending- Heard on 04.04.2022 and reserved for orders.

¶97

Memo filed by applicant on 29.03.2022 producing the Death Certificate of Parashuram Mallappa Bendigeri, who is not a party to the SA. The SA shows that the deceased person is the husband of the Applicant-Shehanaz Siraz Gunaki WHEREAS in the Death Certificate dated 11.06.2021, the wife’s name is shown as Vaishali Bendigeri.

¶98

A6-Letter dated 15.11.2021 is in kannada- no translation copy available

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( In the Appendix, List of documents slightly modified as per the documents annexed and page numbers included )

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Applicant’s important allegations:

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Due to termination from service, Gratuity & PF withheld by Employer and hence not able to repay the dues.

¶102

DC’s order dated 15.11.2021 to defer action but Bank issued letter dated 07.01.2022 to handover sch.property- Applicant approached HC in WP-Liberty given to approach DRT

¶103

Central Registry issue

¶104

Delegating power by AC to Tehsildar is wrong.

¶105

Bank’s letter dated 07.01.2022 is wrong

¶106

OTS opportunity not given to Applicant

¶107

Repayments made not properly accounted/appropriated

¶108

Willing to redeem the property by paying justifiable and legally payable dues.

¶109

( Ref taken from SA 230/2019)

Mrs Shehanaz Siraz Gunaki v. South Indian Bank

Case brief

What is this about?

What did the court decide?

Mrs Shehanaz Siraz Gunaki v. South Indian Bank

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

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