Allowed

Pabba Vijay Kumar v. Cholamandalam Investment and Finance Co. Ltd.

DRT28 Aug 2023SA/12/2022

Case brief

AI extract

What is this about?

Debts Recovery Tribunal quashed a SARFAESI possession notice against two borrowers due to the secured creditor's failure to prove compliance with mandatory service and publication requirements under Security Interest (Enforcement) Rules, 2002.

What did the court decide?

Possession notice dated 25.11.2021 is quashed. Interlocutory applications pending stand closed.

Pabba Vijay Kumar versus Cholamandalam Investment and Finance… — Company and Corporate | DRT (2023)

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IN THE DEBTS^{RECOVERYTRIBUNAL- II} AT HYDERABAD

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DATED THIS^{THE 28TH DAY OF AUGUST,2023}

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PRESENT: SH.^{RAMESHWAR KOTHE,B'Com',L'LB' (Hons')'M'A'} PRESIDING^OFFICER

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SECURITISATION^{APPLICATIONNO.12 OF 2022}

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Between:

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Pabba VijaY Kumar S/o Pabba balaramaiah Aged 60 Years R/o H. No. 2-2-18/54 D.D. ColonY,^VidYaNagar Hyderabad - 500013.

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Pabba Maheshwari S/o Pabba^{ViiaY Kumar} Aged 56 Years R/o H. No. 2-2-18/54 D.D. Colony, VidYa^Nagar Hyderabad - 500013.

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i. Vishwaksen Industries^Ltd. Represented bY^{its Director} 3'd Floor, 3-6-612/613 H i m ayath naga r,^H Ydera^bad.

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.......Applicants.

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Versus

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The Authorised Officer Cholamandalam^{Investment &} Finance Co. Ltd., Dara^House 1tt Floor, NSC Bose^Road Chennai-600001^.

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Cholamandalam^{Investment &} Finance Co. Ltd., ReP.^{bY its} Branch Manager, H'^{No. 7-1.-5911,} 59/6, L02,1't Floor,^MandanaTower Ameerpet, Hyderabad-500016. . . . .Respondents. N

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SA No.t2/2022

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Counsel for the Applicants Counsel for Respondents

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: Mr. Abhay Singh. : Mr. V. Santosh.

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.:ORDER:-

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The Applicants filed the present Securitisation Application u/s.17 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as "SARFAESI Act 2002,,) assailing the possession notice dated 25.11.2021 issued u/s 13(4) of the SARFAESI Act,2OO2 against the Application schedule property.

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The case of the applicant as per the averments of securitisation application, in brief, is that applicants availed a loan of Rs.1,25,25,000/- from 2nd respondent to be repayable in 120 monthly instalments with interest @72.25o/o p.a. commencing from 05.09.2010 against mortgage of the SA schedule property. The last instalment was paid on 15.09.2020 along wtth delay charges. However, respondent has not released tifle documents of the secured asset despite written requests dated 31.10.2020, 23.71.20 and 26.11.2020. The appticants got issued a legal notice dated 03.02.202r followed by cc 752/2027 before the District Consumer Commjssion which is pending adjudication. The respondents issued demand notice u/s 13(2) dated 09.08.2021. Appticants sent objections dated 16.09.2021 u/s 13(34) to demand notice which in turn was rejected by the respondent vide reply dated Zg.Og.2027. Thereafter, respondents issued possession notice dated 25.11.2021. The amount demanded vide notice u/s 13(2) is less than 20olo of the loan amount sanctioned. Hence demand notice is hit by section 31(j) of the SARFAESI Act and initiation of proceedings under SARFAESI Act is bad in law. The respondents cannot invoke the

dW*o

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SA No.7212022

provisions of SARFAESI Act during^{the pendencyol Cc'lsll2l?l} filed before the District^{Consumer Commission'The possession} notice has neither^{been served and affixedas provided u/r 8(1)} nor published in two^{newspapersas provlded u/r 8(2) of} Security Interest^{(Enforcement)Rules, 2OO2 The reliefs granted} by the Government^{for Covid Pandemlcperiod has not been} extended to the^{applicants.In view of the abovefacts and} clrcumstances, applicants^{pray for quashingof impugned} possession notice in the^{interestof justice.}

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The respondents filed^{reply statement.The avermentsin the} reply statement in brief,^{are that the repaymentschedulehas} been revised to^{133 instalments in place of 120 instalments ln} view of fluctuation/revision^{of interest rates by RBI effective} from 05.08.2011, 05.03,2012,^{05.08.2018and 0512 2018} respectively. The^{respondentaction is nothing to do with the} objectlons to 13(2)^{notice.The respondent has rightly initiated} securitisation^{proceedingsagainst the secured asset for recovery} of outstanding dues^{from the applicants.Suitable reply to the} legal notice and written^{versions to lhe CC.|52/202L have been} duly complied.^{The entire averments and groundsin the SA are} devoid of merits^{and accordingly respondentspray for dismissal} of the sA.

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Heard learned counsel^{appearing for the applicant. Respondents} right of arguments^{forfeited.Perusedthe written argumentsfiled} by the^parties and^{the material brought on record.}

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While reiterating the averments^{in the SA, learnedcounsel} appearing for applicant^{contends that respondents have not filed} a single scrap of^{paper as evidence of service of notices in} nw*

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sA No.7212022

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compliance of the provisions 8(1) and 8(2) and therefore, the Securitization proceedings have to be set aside. The respondents also failed to place on record to substantiate its contention that the interest rates were revised entifling it to revise the instalments from 120 to 133. Hence lvithout filing any authorization, the respondents are not entifled to increase the instalments from 120 to 133. It is the further contention of the learned counsel that unless secured creditor registers the security interest with the Central Registry, it cannot invoke the provisions to proceed against the secured asset. The principal amount of loan sanctioned shown in the demand notice dated 09.08.2021 is Rs.1,27,06,867/_ as against the outstanding dues of Rs.22,05,634.83ps on 06.08.2021, is tess than 2Oolo of toan i.e,, Rs.25,27,373.40ps. In para 5 reply statement the outstanding amount in the loan account is shown as Rs.29,11,245.55ps. It is a clear case that in order to overcome the bar u/s 31(j) of the Securitisation Act, respondent increased the dues to Rs.29,11,245.55ps as the dues as on the date of demand notice dated 09.0g.2021 were less than 20olo of amount of loan sanctioned. With these contentions learned counsel prayed for setting aside the impugned possession notice dated 25.L[.2027 in the interest of justice.

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In lts written submissions, respondents reiterated the averments in the reply statement and claimed that violation of rules g(1) and 8(2) under the Security Interest (Enforcement) Rules, 2OO2 is baseless and incorrect. Hence respondents are entiued to invoke the provisions of the Securitisation Act for recovery of dues from the a pplicants. lwu

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SANo.t212022

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Now the points that arise for adjudication are: -

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i) Whether the Applicant made out any valid^{ground for} quashing the possession notice dated 25.11.2021 issued by the respondent against the SA schedule^property under the provisions of SARFAESI Act, 2002?

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ii) Whether the respondents are not entitled to initiate^and continue^proceedings as^per Sec.3l(i) ot the^SARFAESI Act?

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iii) To what relieP

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Point No.(i):

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The main contentions of the applicants is^{non-compliance} provisions of Sections 13(3A), 31(j) and the Rules 8(1), 8(2) of the Security Interest (Enforcement) Rules, 2002 by^the respondents while^proceeding against the SA^{schedule property.} The applicants fully^paid the instalments but the^{respondents are} not releasing the title deeds. The respondents^{refute the} contention by stating that there is outstanding amount^{due in} view of increase in rate of interest and resultant^increasein number of instalments. The applicants carried their^{grievance to} District Consumer Forum and dispute is^{pending resolution} before the learned Forum.

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The respondents stated in their reply and written^{argumentsthat} it followed the^procedure of law while^{proceedingagainstthe} secured asset, but they have filed not even a^{single paperas} proof of compliance of Rules 8(1) and B(2) of the Rules,^2002. Hence, it is to be construed that^{respondent failed to complythe} provisions of Rules 8( 1) and 8(2) of the Security Interest (Enforcement) Rutes,2002. frW*

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SANo.L2l2O2z

Point No.(ii):

With regard to contention about applicability of Section 31(j), sec.31(i) puts a bar on credrtor banks/institutions from initiation of Securitization proceedings if the outstanding amount is berow 20o/o of principar amount and interest thereon. In the instant case, the applicants have taken plea that the demanded amount is less than 20o/o of the sanctioned amount alone as per demand notice dated 09.08.2021. In the absence of break_up of principal amount and interest thereon on the date of issuance of section 13(2) notice, the contention with regard to applicability of Section 31(j) of the SARFAESI Act cannot be accepted.

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In the light of the above discussion, I find that the applicants have made out a valid ground to set aside the possession notice 25.LL.202L for non-comptiance of Rules B(1) and g(2) in service, affixture and publication possession notice, Accordingly, the SA deserves to be allowed.

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Point No.(iii):

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L2. In the result, SA is allowed by setting aside the possession notice dated 2s.rr.202r issued u/s 13(4) of the sARFAESI Act, 2002.

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13, Consequenfly, Interlocutory Applications pending if any, shall stand closed. No order as to costs. Communicate a copy of this order to the parties concerned.

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(fyped to my.dictotion by the Steno, corrected, signed ond pronounced by me in the open coutt on this the 28Ih doy of August, 2023).

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,rXnln-r^ // gi'rt> @UffisHwAR ^ KorHE) PRESIDING OFFICER

Pabba Vijay Kumar v. Cholamandalam Investment and Finance Co. Ltd.

Case brief

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Pabba Vijay Kumar v. Cholamandalam Investment and Finance Co. Ltd.

Case brief

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