Dismissed

Shaju Thomas v. State Bank of India

DRT12 Jun 2023SA/308/2022

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal dismissed the applicants' Securitisation Application challenging the validity of a possession notice and intended sale of mortgaged property by the State Bank of India. The Tribunal held that the bank complied with statutory requirements and the applicants failed to prove violation of procedure or exorbitant interest rates, thus denying the sought relief.

What did the court decide?

The Tribunal dismissed the Securitisation Application seeking to set aside the possession notice and recall the sale; no costs awarded.

Shaju Thomas versus State Bank of India — Company and Corporate | 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 12^th DAY OF JUNE, 2023

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

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S.A No. 308 of 2022

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Between

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Shaju Thomas, S/o Thomas,

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Puthussery House, Pongam, Koratty East P.O.,

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Thrissur-680 308,

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Sole Proprietor,

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M/s Royal Furniture & Bed Centre,

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V/338A, A1, Land Arch Building, Ground Floor, Old Market Road, Angamaly P.O, Ernakulam-683572.

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Philomina Thomas, W/o Thomas,

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Puthussery House, Pongam, Koratty East P.O.,

Thrissur-680 308.

--- Applicants

And

State Bank of India, Asset Recovery Management Branch, Represented by its Authorised Officer.

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--- Defendant

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This petition coming on 12.05.2023 for hearing before me in the presence of Mr. Sreekanth K.M., Advocate for the Applicants and Mr.Jayasankar K., Advocate for the Defendant and upon hearing arguments of learned Counsels for both the parties and upon perusing the material on records, this Tribunal delivered the following:

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SA No.308 of 2022

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O R D E R

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This Securitisation Application was filed on 22.06.2022 seeking to declare that Annexure No.1 Possession notice is illegal, improper, immature, unjust and invalid, violative of the Securitisation Act and Rules and to set aside the same for the ends of justice and equity and to recall Annexure-A1 Possession Notice as it is not proper and not issued in consonance with the legal provisions and allow costs to the applicants.

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The averments of the applicants in the SA in brief are as follows:

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In the year 2017, the 1^st applicant had availed loan for an amount of Rs.20,00,000/- from the defendant Bank by mortgaging the property owned by 1^st applicant, 10.49 Ares of land in Sy. No.489/1 of Kizhakkummury village, Mukundapuram Taluk. On 15.08.2018, due to flood happened the applicant sustained huge losses and heavy repairing was occurred and defendant Bank has not insured the mortgaged property as they promised to insured. So she could not repay the loan amount as per the terms of the loan agreement. Therefore there were defaults in the repayment of the loan amount.

¶26

The defendant initiated the recovery proceedings under Section 13(4) of the SARFAESI Act, and took symbolic possession of the secured asset on 24.05.2022 vide the possession notice, Annexure-A1 issued by the defendant to the applicant dated 24.05.2022. After receipt of the possession notice, the applicants have sought more time for the repayment of the loan arrears as he was in deep financial crisis due to cancer.

¶27

The calculations made by the bank with respect to the outstanding due are incorrect. The defendant Bank has inserted extra interest rates under various heads exorbitantly. The interest rate charged by the defendants is in violation of the Kerala Prohibition of Charging Exorbitant Interest Act, 2012. Furthermore, certain payments made by the applicants have not been included in the loan statement provided by the defendant bank. The said act of the defendant Bank is illegal and unreasonable.

¶28

The classification of NPA is incorrect, respondent has pointed out a date 18.10.2021 which was incorrect as the NPA date but later on through the letter dated 10.02.2022, respondent clarified that the said date is technical one and account was classified as NPA only on 10^th February, 2022.

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Page 2 of 10

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SA No.308 of 2022

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Annexure No.1 is filed with material suppression of facts. The registration of CERSAI is not revealed by the respondent. AnnexureA1 possession notice is invalid, unsustainable and unenforceable and issued in total violation of the statute. Moreover Annexure-A1 was not published in two leading newspapers within 7 days from the date of taking possession and the statutory provision under Rule 8(2) of the Security Interest (Enforcement) Rules, 2002 was not complied with the defendant. Annexure-1 notice was also not affixed at a conspicuous place of the property and it is a blatant violation of Rule 8(1) of the Security Interest (Enforcement) Rules, 2002.

¶32

As there is no equitable mortgage executed by the applicants for Annexure-A1 notice schedule property, it does not come under the purview of secured asset as defined by Section 2 (zc) of the SARFAESI Act 2002 and the defendant is restrained from invoking SARFAESI provisions.

¶33

The defendant is liable to regularize the loan account by accepting the payments made by the applicants even in parts. The applicants also undertake to repay the loan amount promptly after repaying the overdue amounts and when the defendant regularizes the loan account. Hence the applicants are constrained to approach this Hon'ble Tribunal under Section 17 of the Act.

¶34

On 08.02.2023 the respondent bank issued notice of intended sale, Annexure-A2 under rule 6(2) & 8(6) of the Security Interest (Enforcement) Rules, 2002. Without conducting a proper valuation of the property, the respondent had fixed Rs.85,88,000/- as reserve price. The property is having a value of more than Rs.1.25 crores, including the land and building and the respondent bank has proposed to sale the property for mere Rs.85,88,000/-.

¶35

The respondent filed M.C petition before the Chief Judicial Magistrate Court, Thrissur for assistance to take the physical possession of the property in M.C. No.93/2023 and Commissioner was appointed and Commissioner issued notice dated 24.02.2023, Annexure-A3 for taking possession.

¶36

The defendant came on record and filed Written Statement interalia contending as follows :

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The applicant has not made out any valid grounds warranting interference of this Hon'ble Tribunal under Sec.17 of the SARFAESI Act. This Securitization Application is barred by limitation.

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Page 3 of 10

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SA No.308 of 2022

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Allegation that Annexure-A1 possession notice is with factual mistakes and is in violation of the statutory provisions is denied.

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Applicants have admitted that they have availed loan from defendant bank and have mortgaged property of 1^st applicant having an extent of 10.49 Ares in Sy. No.489/1 of Kizhakkummury village, Mukundapuram Taluk, as security for the loan amount. Further allegations in paragraph 5.iii of the Securitization Application that due to flood applicant sustained huge losses and heavy repairing was occurred and that defendant bank has not insured the mortgaged property as promised are denied. Defendant bank had never promised like that. Further averment that, due to flood applicant sustained heavy loss and heavy repairing was needed in the house and due to that applicants could not repay the loan amount and therefore there were defaults in the repayment of the loan amount are denied.

¶42

The loan account became NPA on 05.10.2020. Defendant bank had complied with all guidelines/directions of RBI regarding classification of loan account as NPA. After that defendant Bank issued a demand notice u/s 13(2) dated 18.10.2021 in supersession of earlier Sec.13(2) demand notice dated 17.06.2019. Section 13(2) demand notice dated 18.10.2021 states that it is issued superseding demand notice dated 17.06.2019. True copy of Sec.13(2) demand notice dated 18.10.2021 issued to all parties to loan transaction is produced herewith as Annexure-B1. Annexure-B1 notice sent to 1^st applicant was received by his mother Philomina, who is 2^nd applicant in this S.A. Annexure-B1 notice sent to Thomas P.A was returned with endorsement ‘expired’. Annexure-B1 notice sent to 2^nd applicant Philomina was served. True copies of returned AD cards and returned postal covers for service of Annexure-B1 are produced herewith as Annexure-B2 series. Annexure-B1 notice was also published in two dailies. True copy of paper publication dated 16.02.2022 in The Hindu daily and true copy of paper publication dated 16.02.2022 in the Deshabimani daily are produced herewith as Annexure-B3 & B4 respectively. It was also affixed on the respective addresses. It is submitted that applicants have not submitted any representation/ objection to Annexure-B1 Sec.13(2) notice.

¶43

Even after affixture, service and publication of Annexure-B1 notice, the loan amount was not repaid and hence defendant bank issued Sec.13(4) notice dated 24.05.2022, Annexure-B5. Applicants were served with it. Annexure-B5 notice was affixed on conspicuous part of collaterally secured property on same day. True copy of affixation report dated 25.05.2022 for affixture of Annexure-B6 notice,

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Page 4 of 10

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SA No.308 of 2022

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signed by witnesses and Chief Manager, Assets Recovery Management Branch, Ernakulam is produced herewith as Annexure-B6. True copy of photograph showing affixation is produced herewith as AnnexureB7. Annexure-B5 notice was sent to all parties to the loan transaction. True copy of returned AD cards and returned postal covers are produced herewith as Annexure-B8 series. It was also published in two leading news papers. True copy of paper publication of AnnexureB5 notice in Mathrubhumi daily dated 25.5.2022 and The Hindu daily dated 25.5.2022 are produced herewith as Annexure-B9 & B10 respectively.

¶47

The allegations in paragraph 5.v of S.A. are denied. Defendant Bank is maintaining true and correct accounts of all loan transactions. Calculations of outstanding due are correct. Allegation that defendant bank has not disclosed exact interest rate for loan amount is denied. Defendant bank has not charged exorbitant rate of interest or extra interest rates. Defendant bank has charged interest strictly in accordance with contract between bank and borrowers/ guarantors and are strictly in accordance with RBI directions and other rules. The Kerala Prohibition of Charging Exorbitant Interest Act, 2012 is not applicable in this case.

¶48

Defendant bank has registered the security interest creation with CERSAI. True copy of addition of security interest challan and addition of security interest acknowledgement report are produced herewith as Annexure-B11 series. Applicant is a chronic defaulter and there is no bonafides in the averment that applicant is ready to clear loan account on a structural payment basis.

¶49

Defendant bank has taken a valuation of the secured asset from an approved valuer. True copy of Valuation Report dated 09.03.2022 is produced herewith as Annexure-B12. Valuation Report clearly states that the property is in residential a double storied residential building. Annexure-B12 Valuation Report shows that realizable value of the property is Rs.85,88,000/- and distressed sale value will be Rs.76,34,000/-.

¶50

Defendant bank had issued a sale notice dated 08.02.2023 for e-auction sale of secured asset scheduled to be held on 20.03.2023. It was delivered to parties to loan transaction and received by them and produced by them along with I.A. No.833/2023 which is an amendment application to amend this S.A. It was affixed on secured asset on 21.02.2023. True copy of photograph of affixture of the sale notice is produced herewith as Annexure-B13. The sale notice was published in two daily news papers also. True copy of paper

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Page 5 of 10

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SA No.308 of 2022

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publication in Mathrubhumi daily dated 17.02.2023 is produced herewith and marked as Annexure-B14. It was also published in The Hindu daily dated 17.02.2023. True copy of paper publication in The Hindu daily dated 17.102.2023 is produced herewith as AnnexureB15. Thus defendant Bank have complied with relevant provisions in SARFAESI Act and allied Rules.

¶54

Sale scheduled on 20.03.2023 as per Annexure-B13 notice did not take place for want of bidders. The amount due to defendant bank as on 24.03.2023 is Rs.44,63,765/-. Averments and allegations contained in Ground 1 to 10 of S.A are denied. Hence the S.A. is devoid of any merit and the same may be dismissed with cost.

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The point arising for consideration is as to whether the applicants are entitled to get the reliefs sought for in this S.A.

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Point: The availment of loan for an amount of Rs.20,00,000/from the defendant bank upon creation of security interest over the immovable property owned by the 1^st applicant in Sy. No.489/1 of Kizhakkummuri village, Mukundapuram Taluk and default in repayment of the outstanding loan due has been admitted by the applicants in the S.A. Hence the loan account of the applicants came to be classified as Non-Performing Asset on 5.10.2020. Demand notice dated 18.10.2021, Annexure-B1 in supersession of the earlier demand notice dated 17.6.2019 was issued calling upon the applicants to pay the outstanding loan due within 60 days from the date of receipt of the demand notice. The defendant has produced Annexure-B2 series postal acknowledgment cards and postal cover to show that demand notice sent to the 1^st applicant was received by his mother Philomina, who is the 2^nd applicant and that demand notice was served to the 2^nd applicant and that demand notice sent to one Thomas was returned with postal endorsement of ‘expired’. The defendant has also produced copies of paper publications, Annexure-B3 and B4 to show that Annexure-B1 demand notice was published in The Hindu daily dated 16.2.2022 and Desabhimani daily dated 16.2.2022. The contention of the defendant that the applicants did not send any objection/ representation has not been refuted or challenged by the side of the applicants.

¶57

According to the defendant, since the applicants failed to respond to the terms of the demand notice, Annexure-B1, AnnexureA1 possession notice dated 24.5.2021, (produced as Annexure-B5 by the defendant) was issued for taking symbolic possession of the secured asset. The defendant has produced true copy of affixation report, Annexure-B6 along with photograph, Annexure-B7 to prove its

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Page 6 of 10

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SA No.308 of 2022

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contention that the possession notice was affixed on the conspicuous part of the secured asset. A perusal of Annexure-B8 series returned postal acknowledgement card and returned postal cover shows that the possession notice was served to the applicants and that possession notice sent to M/s Royal Furniture & Bed Centre was returned un-served. The defendant has produced copies of paper publication Annexure-B9 and B10 to show that it was published in Mathrubhumi daily dated 25.2.2022 and The Hindu daily dated 25.2.2022.

¶61

Sale Notice dated 8.2.2023, Annexure-A2, was issued in order to bring the secured asset for sale in the auction. It is seen from the perusal of Annexure-B13 to B15 to shows that the sale notice was affixed on the conspicuous part of the secured asset and that it was also published in Mathrubhumi daily dated 17.2.2022 and The Hindu daily dated 17.2.2022. The defendant has produced Annexure-B12, true copy of valuation report dated 09.03.2022 to disprove the contention of the applicant that valuation of the secured asset has fixed only after having obtained proper valuation report from the approved Valuer. Admittedly, sale was not held for want of bidders.

¶62

On application filed by the defendant before the Ld. Chief Judicial Magistrate Court, Thrissur, order was passed in M.C. No.93/2023 appointing Advocate Commissioner to take physical possession of the secured asset. The Advocate Commissioner issued notice dated 24.2.2023, Annexure-A3 for taking physical possession of the secured asset. In any event, in the present S.A. the applicants are not seeking any relief in respect of Annexure-A2 Sale notice and Annexure-A3 Advocate Commissioner notice.

¶63

The applicants have not produced any material before this Tribunal to prove their averment that the defendant has charged exorbitant rate of interest. However the above averment of the applicants has been refuted by the side of the defendant. The defendant has produced true copy of addition of security interest challan and addition of security interest acknowledgement report to prove his contention that the creation of security interest has been registered with CERSAI. Hence the contention of the applicants that security interest has not registered with CERSAI.

¶64

The applicants have miserably failed to prove their contentions that Annexure-A1 possession notice was issued in violation of statutory provisions of the SARFAESI Act, 2002 and the Rules made there under. Therefore, this Tribunal holds that the applicants are not entitled to get the relief sought for in the S.A.

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Page 7 of 10

¶66

SA No.308 of 2022

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In the result this S.A. No.308 of 2022 stands dismissed. No costs.

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Dictated to Steno, taken down, transcribed, typed by him, corrected and pronounced by me in the open court on this the 12^th June, 2023.

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(Su. WILLYAHM) PRESIDING OFFICER

Mj/

Page 8 of 10

SA No.308 of 2022

List of documents filed by the Applicants along with the S.A.

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Sl. No.	Date	Particulars
1.	24.05.2022	True copy of Possession Notice issued under Sub Rule (1) of Rule 8 of Security Interest (Enforcement)Rules, 2002.	Annexure-A1
2.	08.02.2023	True copy of notice of intended sale under Rule 6(2) & 8(6) of the Security Interest (Enforcement) Rules, 2002 underSARFAESI Act, 2002.	Annexure-A2
3.	24.02.2023	True copy of Advocate Commissioner notice of intended take possession in M.C. No.93/2023 of CJM Court Thrissur.	Annexure-A3

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List of documents filed by the Defendant Bank along with the Written Statement

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SL. No.	Date	Particulars
1.	18.10.2021	True copy of Sec.13(2) demand notice issued to allparties toloantransaction	Annexure-B1
2.	---	True copies of returned AD cards and returned postal covers for service of Annexure-B1.	Annexure-B2 series
3.	16.02.2022	True copy of paper publication publishedin TheHinduDaily.	Annexure-B3
4.	16.02.2022	True copy of paper publication publishedin TheDeshabimanidaily.	Annexure-B4
5.	24.05.2022	True copy of Sec.13(4) notice under SARFAESI Act, 2002 issued by the defendant.	Annexure-B5
6.	25.05.2022	True copy of affixation report for affixture of Annexure-B5 notice signed by witnesses and chief Manager, assets Recovery Management Branch, Ernakulam.	Annexure-B6
7.	---	True copy of photograph showing affixation.	Annexure-B7
8.	---	True copy of returned AD cards and returned postalcovers.	Annexure-B8 series

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Page 9 of 10

¶78

SA No.308 of 2022

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9.	25.05.2022	True publis	copy of paper hedin TheMathrubh	publication umidaily	Annexure-B9
10.	25.05.2022	True publis	copy of paper hedin TheHinduDa	publication ily.	Annexure-B10
11.	---	True intere intere	copy of addition st challan and additio st acknowledgementr	of security n of security eport.	Annexure-B11
12.	09.03.2022	True secur P.A.Ja	copy of Valuation ed asset from appr yanandan.	Report of oved valuer	Annexure-B12
13.	---	True the sa	copy of photograph o lenotice.	f affixture of	Annexure-B13
14.	17.02.2023	True publis	copy of paper hedin TheMathrubh	publication umidaily	Annexure-B14
15.	17.02.2023	True publis	copy of paper hedin TheHindu dai	publication ly.	Annexure-B15

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(Su. WILLYAHM) PRESIDING OFFICER

¶81

Mj/

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Page 10 of 10

Shaju Thomas v. State Bank of India

Case brief

What is this about?

What did the court decide?

Shaju Thomas v. State Bank of India

Case brief

What is this about?

What did the court decide?

What the court decided

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