Dismissed

M/S Javid Sheep Import Export v. Jammu and Kashmir Bank Limited

DRT6 Jun 2023SA/4/2023

Case brief

AI extract

What is this about?

In this Securitization Application under the SARFAESI Act, the applicants challenged the bank's possession of secured assets, arguing that guarantors who were not mortgagors required notice under Rule 8. The Tribunal held that Rule 8 applies only to borrowers/mortgagors and no prejudice was caused to guarantors, dismissing the application.

What did the court decide?

The Securitization Application is dismissed; all pending Interlocutory Applications are disposed of accordingly.

M/S Javid Sheep Import Export versus Jammu and Kashmir Bank… — Banking and Recovery | DRT (2023)

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SA No.04/2023

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DEBTS RECOVERY TRIBUNAL-I, CHANDIGARH

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SA 04/2023 M/s Javid Sheep Import Export and another Versus Authorized Officer, J & K Bank and others

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06.06.2023 Item No.29

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Present: Sh.Karan Dev, Counsel for the Applicant. Sh.Mayank Mathur & Sh.Gaurav Thakur, Counsel for respondent bank.

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M/s Javid Sheep Import Export, through its proprietor Mr.Javid Iqbal and another (Applicants) have filed the present Securitization Application under Section 17 of the SARFAESI Act, against Authorized Officer, Jammu and Kashmir Bank and others (Respondents).

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Admittedly, Jammu and Kashmir Bank Limited had granted some credit facilities to applicant No.1. Mohammad Ramzan (applicant No.2); Mohammad Khalid (respondent No.2) and Jhangir Ahmed (predecessor interest of respondents No.3 to 6) were the guarantors. This loan was secured by the mortgage of property of Mohammad Ramzan. Since, applicant No.1 could not make the repayment of the loan, the account of applicant was declared NPA. Bank issued notice under Section 13(2) of the SARFAESI Act. Admittedly, no objections were filed and the Bank made an attempt to take the possession of the secured asset. It appears that on 06.01.2023, Bank tried to take the possession but could not succeed and was able to obtain only symbolic possession of the secured asset and ultimately Bank served possession notice under Section 13(4) of the SARFAESI Act. Today i.e. 06.06.2023, Mr.Mayank Mathur, counsel for respondent bank has made a statement at the bar that Bank has taken the physical possession of the secured asset today.

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In this SA, the main grievance of the applicants is that no possession notice was served upon Mohammad Khalid (respondent No.2) and legal heirs of Jhangir Ahmed who are the guarantors in this case. Counsel for the applicants admits that notice was duly served upon both the applicants. Mr. Karan Dev,

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Page 1 of 3

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SA No.04/2023

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counsel for the applicants has argued that as per SARFAESI Act, the possession notice is also required to be served upon all the parties, namely the borrowers as well as the guarantors. In this connection, he has drawn my contention to Section 2 of the SARFAESI Act and submitted that as per Section 2 the ‘borrower’ means a person who has been granted financial assistance by any bank or financial institution or who has given any guarantee or created any mortgage for the financial assistance granted by the bank. He has further argued that under Section 13(4) and Rule 8 of the Rules, the notice has to be given to all the parties. He has placed reliance upon two judgments i.e. Civil Appeal No.10874 of 2018, titled M/s Hindon Forge Private Limited and another versus The State of Uttar Pradesh, through District Magistrate, Ghaziabad and another and Writ C No.9731 of 2019, titled M/s Mahesh Industries and others versus The Kaur Vyasa Bank Limited . He has further submitted that the action of the Bank is in violation of the SARFAESI Act and is thus, liable to be set aside.

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4. Per contr a, Mr.Mayank Mathur, counsel for the respondent bank has argued that under the law, there is no requirement of issuing any notice to the guarantors, who are not the mortgagers. He has further argued that the notice under Rule 8 has to be given to the person from whom the possession has to be taken. As far as the person who is not the mortgagor, the law does not envisage any notice to him either before taking possession or after taking the possession. Mr.Mathur, submits that the applicants have been served notice under Section 13(2) and after taking the possession today, applicants have also been served with notice under Rule 8 of the Act. He submits that Bank has complied with all the requirements, which were required to be taken under the SARFAESI Act.

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I have duly considered the rival contentions.

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It is admitted on the record that the Bank had issued the notice under Section 13(2) of the Act to the borrower as well as Mohammad Ramzan, who is the guarantor and the mortgagor. There is no denying the fact that a borrower or a mortgagor can approach the Debts Recovery Tribunal after the bank has taken the symbolic possession of the secured asset. Hon’ble Supreme Court in M/s Hindon

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Page 2 of 3

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SA No.04/2023

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Forge Private Limited and another versus The State of Uttar Pradesh, through District Magistrate, Ghaziabad and another, has held that the borrower/mortgagor can certainly approach the Debts Recovery Tribunal when the Bank takes the symbolic possession of the secured asset. The question which remains to be determined is, ‘whether the guarantor, who is not the mortgagor, is entitled to notice under Rule 8?’. The precise contention of Mr.Karan is that under SARFAESI Act, the borrower and the guarantor stand on the same footing and both are entitled to notice. However, I am unable to persuade myself to the said contention. Rule 8 says that the notice should be served on the borrower. It does not mean the guarantor. We have to construe the words of the enactment in the context in which they have been used. First of all, none of the guarantors who was not the mortgagor, is before us. No prejudice has been caused to them by the action of the Bank in taking the possession. As far as the borrower and guarantor are concerned, it is admitted on the record that notice of symbolic possession was served upon them.

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After having considered the whole of the case, I am of the considered view that there is no ground to quash the notice dated 06.01.2022? (06.03.2022). Accordingly, there is no merit in the present SA. The same is hereby dismissed . All the pending IAs, if any, are also disposed of, accordingly.

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File be consigned to record room after due compliance.

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(A S Narang) Presiding Officer DRT-I, Chandigarh

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Pronounced in open court Manoj/06.06.2023

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M/S Javid Sheep Import Export v. Jammu and Kashmir Bank Limited

Case brief

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M/S Javid Sheep Import Export v. Jammu and Kashmir Bank Limited

Case brief

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