Dismissed

Abdul Nazar @ Chinnappa v. Hdfc Bank

DRT4 Sept 2023APPEAL/6/2023

Case brief

AI extract

What is this about?

This Tribunal dismissed an appeal challenging the Registrar's order declining to file an application under Section 17(1) of the SARFAESI Act. The court held that no cause of action existed as the secured creditor had not initiated any recovery measures under Section 13(4).

What did the court decide?

The application under Section 17(1) of the SARFAESI Act was declined to be taken on file.

Abdul Nazar @ Chinnappa versus Hdfc Bank — Banking and Recovery | DRT (2023)

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Fair Order

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IN THE DEBTS RECOVERY TRIBUNAL - 1 AT ERNAKULAM

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DATED THIS 4^th DAY OF SEPTEMBER, 2023

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PRESENT: Su. WILLYAHM, B.Sc., M.L. [DISTRICT JUDGE - Retd] PRESIDING OFFICER

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Appeal No. 6 of 2023

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I.D. No.5797 of 2023

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Diary No.602 of 2023

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BETWEEN:

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Abdul Nazar @ Chinnappa,

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S/o Mukkali Ahamedkunhi,

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Residing at 23/1688-B-13 (6^th floor),

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Forest Creek Apartment,

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Feroke P.O., Kallai,

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Thiruvannur Road,

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Panniyankara, Kozhikode-673 003.

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Ahammed Fayiz,

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S/o Ummerkoya P., Pallikandi (Wood Rose),

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Residing at Forest Creek Apartment, 23/1688, D-28, 7^th Floor, Thiruvannur Road, Kallai P.O. Kozhikode – 673 003.

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--Appellants/Applicants

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Appeal 6 of 2023

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AND:

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The Registrar, The Debts Recovery Tribunal-1, 5^th Floor, Kerala State Housing Board, Panampilly Nagar, Ernakulam.

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--Respondent

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This Appeal coming on 18.08.2023 for hearing before me in the presence of Mr. S.R.K. Prathap, Advocate appearing for Appellants and upon hearing the arguments of Counsel for the Appellants and having stood over for consideration till this day, this Tribunal delivered the following:

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O R D E R

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The present Appeal has been filed by the appellants against the Order dated 03.07.2023 in ID No.5797/2023 of the Registrar, Debts Recovery Tribunal-1, Ernakulam declining to take the S.A on file.

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On receipt of the above said SA, clarification was sought for from the Counsel for the appellants/applicants by the Registry to clarify as to how the SA was filed under Section 17(1) of the SARFAESI Act, 2002 against Annexure-A5 demand notice dated 05.03.2022 issued by the 1^st defendant. The S.A. was represented by the Counsel for the appellants stating that the challenge is not against Annexure-A5 demand notice and that application is filed for declaration that the property mentioned in Annexure-A5 is not a secured asset of the creditor. The Registrar declined to take the S.A on file observing as follows:

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“ 4. Sub-section (1) of Section 17 of the Act, 2002 provides that any person including a borrower who is aggrieved by any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor or by his authorised officer may make an application before the jurisdictional Debts Recovery Tribunal within 45 days from the date on which such measure has been taken.

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5. The Applicant herein has not produced any document other than Annexure-5 demand notice issued by 1^st defendant along with the instant Application. Since Annexure-5 demand notice under sub-section (2) of section 13 of the Act, 2002 would not give rise to any cause of action to initiate an application under sub-section (1) of section17 of the Act, 2002, I hereby decline to register the

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Page 2 of 5

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Appeal 6 of 2023

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Application under sub-Rule (4) of Rule 5 of the Debts Recovery Tribunal (Procedure) Rules, 1993”.

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The appellants/applicants having aggrieved against the above order has preferred the present Appeal before this Tribunal.

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The Counsel appearing for the appellants/applicants submitted that the 1^st appellant is the owner for the property mentioned in Annexure-A5 demand notice and that the 2^nd applicant is the tenant of the property and that the 1^st applicant, earlier, by way of power of attorney deed had executed all the rights to defendants 5 and 6 to act as the owner of the property and that defendants 5 and 6 constructed an apartment in the name and style of “Forest Creek Apartment” and that the 1^st appellant is having two apartments, one in the 5^th floor and another in 7^th floor of the said Forest Creek Apartment and that the 1^st defendant had affixed notice on the walls of the apartment in the 7^th floor of the Forest Creek Apartment showing the 3^rd defendant as the borrower alone from the 2^nd defendant Bank and that the 1^st appellant filed suit, O.S. No.342/2022 before the Munsiff Court, Kozhikode for restraining the defendants 1 and 2 from trespassing into the Plaint Schedule Property and that temporary injunction was granted as prayed for and that the home loan of Rs.25,00,000/- was given to the 3^rd defendant by the strength of a mere agreement between the 1^st defendant and the 3^rd defendant and that as far as Annexure-A5 demand notice is concerned, the 1^st appellant is a third party and that he has not aware of the legal action taken by the secured creditor against his borrower and that DRT has got power to look into the legality of the property taken by the secured creditor and that the SA is maintainable before this Tribunal.

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The appellants have produced copies of Annexure-A1 to A4 pertaining to land tax receipt, property tax receipt, ownership certificate and power of attorney. In Annexure-A4 power of attorney, there is a clear recital that the agents who are defendants 5 and 6 in the SA are entitled to sell, mortgage or lease any right over the ‘B’ schedule property. Even though the 1^st appellant claims that he is the owner of the SA subject matter of the property on the strength of Partition Deed No.573/1999 of SRO, Meenchantha, the said document has not been produced. In any event, as per the above recitals found in Annexure-A4, the 5^th and 6^th defendants are entitled to sell or mortgage or create any interest over the subject matter of the property. In any event, what has to be decided in the Appeal is that as to whether the order of the Registrar declining to register the SA is correct or not.

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The provisions of Section 17(1) of the SARFAESI Act, 2002 reads as follows :

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Page 3 of 5

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Appeal 6 of 2023

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“(1) Any person (including borrower), aggrieved by any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor or his authorised officer under this Chapter [may make an application along with such fee, as may be prescribed] to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measure had been taken.”

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Admittedly, it is not in dispute that the appellants of the present appeal and the applicants in the SA are aggrieved persons. But the question arises as to whether at what stage or in what circumstance, appellants/ applicants are entitled to file the SA before this Tribunal. It would be pertinent to re-produce herein the extract of provisions of Section 13(4) of the Security Interest Enforcement Rules, 2002.

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“(4) In case the borrower fails to discharge his liability in full within the period specified in sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely:-

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(a) take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realizing the secured asset;

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(b) take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realizing the secured asset; PROVIDED that the right to transfer by way of lease, assignment or sale shall be exercised only where the substantial part of the business of the borrower is held as security for the debt:

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PROVIDED FURTHER that where the management of whole of the business or part of the business is severable, the secured creditor shall take over the management of such business of the borrower which is relatable to the security or the debt.

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(c) appoint any person (hereafter referred to as the manager), to manage the secured assets the possession of which has been taken over by the secured creditor;

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(d) require at any time by notice in writing, any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt.”

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Page 4 of 5

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Appeal 6 of 2023

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As per the above provision of Section 13(4) of the Security Interest (Enforcement Rules) 2002, unless the secured creditor initiates the measures referred to therein, the borrower or aggrieved person is not entitled to file the application under Section 17(1) of the SARFAESI Act, 2002 before this Tribunal. This Tribunal does not find any force in the submission made by the Counsel for the appellants that since the 1^st appellant is the third party to Annexure-A5 demand notice, he has no knowledge of legal action taken by the 1^st defendant. Since no measures have been initiated by the 1^st defendant as per Section 13(4) of the SARFAESI Act, 2002, no cause of action survives as on today for the appellants/applicants to file the SA. Hence this Tribunal does not find any valid reasons to interfere with the order of the Registrar of this Tribunal in declining to take the SA (ID) No.5797/2023 on file.

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In view of the above, Appeal No.6/2023 stands dismissed.

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Dictated to Steno, taken down, transcribed, typed by him, corrected and Pronounced by me in the Open Court, this the 4^th September, 2023.

[Su. WILLYAHM]

PRESIDING OFFICER

Mj/

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Abdul Nazar @ Chinnappa v. Hdfc Bank

Case brief

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Abdul Nazar @ Chinnappa v. Hdfc Bank

Case brief

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