Dismissed

Chandran P v. versus South Indian Bank

DRT13 Feb 2023SA/342/2022

Case brief

AI extract

What is this about?

The Debt Recovery Tribunal dismissed an application seeking to quash notices issued by an Advocate Commissioner for taking possession of secured assets. The Tribunal rejected claims that the notices were invalid measures under the SARFAESI Act, held the asset was not exempt agricultural land due to lack of early objection, and found the applicant failed to prove non-compliance of statutory mandate

What did the court decide?

The Securitisation Application No. 342 of 2022 stands dismissed with no order as to costs.

Chandran P v versus South Indian 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 13^th DAY OF FEBRUARY, 2023

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

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SA No.342 of 2022

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Between

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Chandran P.V., S/o. Velu, Kunnathu House, Paithala, Olimkadavu, Mangalam Dam, Palakkad District – 678 706.

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---Applicant

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And

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The Authorised Officer, South Indian Bank Ltd., Nemmara Branch, Nemmara, Palakkad District – 678 508.

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---Defendant

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This Securitisation Application coming on 18.01.2023 for final hearing before me in the presence of Ms. Swetha K.S., Advocate representing Counsel for the Applicant and Mr. Varughese Cherian, Advocate for the Defendant and upon hearing the arguments of Counsels for the parties 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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This Securitisation Application was filed on 07.07.2022 seeking to quash Annexure - A3 Advocate Commissioner notice dated 16.06.2022 and Annexure – A5 (mistakenly mentioned Annexure – A4 in the SA) Advocate Commissioner notice dated 07.10.2022.

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SA No.342 of 2022

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2. The brief averments of the applicant in the SA are as follows:

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Applicant who is an agriculturist availed an agricultural loan facility named Kissan Credit Card of Rs.40,00,000/- (Rupees Forty Lakhs only) from the defendant bank on 15.01.2015. Applicant had repaid more than Rs.10,00,000/- (Rupees Ten Lakhs only) in the loan account. Few receipts are produced as Annexure-A1 series. There was some default on the repayment of the loan account. Bank initiated SARFAESI proceedings against the applicant. The Bank issued demand notice under Section 13(2) of the SARFAESI Act dated 29.06.2020, Annexure-A2. As per the notice the total amount due as on 28.05.2020 was Rs.55,87,862/-. The amount demanded is highly exorbitant. The applicant had approached the bank several times and requested to reduce the exorbitant interest rate and to grant further time to settle the loan account. Bank then issued possession notice stating very same amount as due on 01.12.2020. On 13.06.2020 the bank officials along with an Advocate Commissioner visited the house of the applicant and handed over a notice dated 13.06.2022, Annexure-A3.

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M.C. No.140/2019 filed u/s 14 of the Act for taking possession of secured assets. From the order in M.C it is not clear which of the secured assets are intended to be taken possession. No notice was issued to the applicant. More over the Hon’ble Chief Judicial Magistrate has passed an order dated 18.02.2022 appointing Advocate Commissioner to take delivery of the possession and to submit report on or before 18.06.2022. Now the order of the Chief Judicial Magistrate has expired so the Advocate Commissioner has no authority to act beyond direction issued by the Chief Judicial Magistrate court. As per Section 14, the proceedings before the Chief Judicial Magistrate Court itself has to be concluded within the period of 60 days in aggregate. Now it is learned by the applicant that the Commissioner and the bank officials are taking steps to evict the applicant from his residential property on 08^th July, 2022. If that happens, the applicant has no other place to go with his wife. Both the applicant and his wife are suffering from various old age ailments.

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The applicant has been denied the opportunity to reclaim the assets as provided under Section 13(8). The applicant had approached the defendant bank and sought for a copy of the loan account statement to verify the arrears and the balance outstanding amount. But the applicant was denied the account statement. The applicant is

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Page 2 of 9

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SA No.342 of 2022

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ready to repay the actual balance amount payable and to settle the loan account. The balance outstanding amount in the account as per Annexure - A2 is Rs.55,87,862/- which is highly exorbitant. The interest demanded is highly exorbitant than as agreed between the parties. So recovering the interest above the rate agreed as per the loan agreement is against the circulars of the RBI. Several other hidden charges on various heads were also added to the loan account of the applicant. The calculation of the balance outstanding amount is also wrong and highly exorbitant.

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The secured assets consist of purely agricultural land which is exempted from proceedings under the SARFAESI Act. The Advocate Commissioner has threatened that he would take the physical possession of the assets of the applicant on 08.07.2022. The entire proceeding initiated by the defendant was vitiated and therefore this Tribunal may be pleased to declare that the proceeding initiated by the defendant is invalid.

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It is submitted that during the pendency of the SA, the Advocate Commissioner has issued another notice dated 07.10.2022 stating that physical possession will be taken on 26.10.2022. A true photo copy of the notice dated 07.10.2022 is produced as Annexure-A4. Annexure - A4 is illegal and is only liable to be set aside. It is not in accordance with the direction issued by the Chief Judicial Magistrate in M.C. No.9/2022.

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

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The applicant is not entitled for any of the reliefs sought for in the above SA on several grounds. Even though a notice issued by the Advocate Commissioner appointed Section 14 can be a cause of action for filing application under Section 17, the primary requirement in an application under Section 17 is that there must be a challenge with regard to any of the ‘measures’ initiated by the secured creditor under the provisions of SARFAESI Act. It is the settled position that filing of Section 14 application and also passing of order in an application under Section 14 can be a measure and the same can be a subject matter under challenge in an application under Section 17. However any notice which was issued pursuant to the order passed by the Chief Judicial Magistrate Court issued by the Advocate Commissioner alone can be a subject matter of challenge or it can be never treated as

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SA No.342 of 2022

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a measure under the purview of Section 17 of the Act, in other words the notice issued by the Advocate Commissioner is not a measure as envisaged under the Act or Rules initiated by the secured creditor. Hence the above SA is liable to be dismissed in limine any with cost to the defendant bank.

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The applicant has himself admitted the availment of credit facility and also no dispute has been raised with regard to the creation of security interest in favour of the defendant bank in respect of the subject property. The fact regarding the default in repayment of the loan amount is also admitted by the applicant in the SA. In view of the default the defendant bank was constrained to declare the account of the applicant/borrower as Non-Performing Asset (NPA) as early as on 31.03.2019 and also initiated proceedings under SARFAESI Act by issuing demand notice dated 29.06.2020. The borrowers including the applicant had neither given any reply nor settled the loan account as demanded as per Annexure - A2 demand notice. Hence, the defendant bank was constrained to proceed further and issued possession notice dated 01.12.2020 under Section 13(4) of the Act as per Rule 8(1) of the Security Interest Enforcement Rules. The defendant bank had delivered the aforesaid possession notice to the borrowers and also the same was affixed on the subject properties and also was published the same as per the rules. The copies of the possession notice dated 01.1.22020, its postal receipts, postal track report in respect of the possession notice issued to the applicant and also the publications in respect of the same are produced as Annexure-B1 series. Hence defendant had complied with all the mandatory requirements with regard to the proceedings initiated under SARFAESI Act and all the contrary averments are false.

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Despite the aforementioned notices and proceedings, the borrowers including the applicant failed to settle the loan account. In pursuance to the application filed by the defendant bank under Section 14, order was passed by the Chief Judicial Magistrate Court appointing the Advocate Commissioner in order to take physical possession of the subject properties as early as on 18.02.2022 as reflected in Annexure - A4, copy of proceedings in M.C. No.9/2022.

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The contention made by the applicant to the effect that the amount demanded by the defendant bank is highly exorbitant is absolutely false and denied and no objection was raised by the borrowers with regard to any of the proceedings or any challenge

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Page 4 of 9

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SA No.342 of 2022

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made with regard to the same. Annexure – A3 notice is only an intimation made by the Advocate commissioner to the applicant with regard to the proceedings under Section 14 before the Chief Judicial Magistrate Court. The defendant bank, being the secured creditor, is entitled to proceed further with the SARFAESI measures including under Section 14 and the order was also passed by the Chief Judicial Magistrate Court for the purpose of taking physical possession and there is no question of expiry of order passed by the Chief Judicial Magistrate Court. In pursuant to the order passed by the Chief Judicial Magistrate Court, the Advocate Commissioner had visited the subject premises much earlier and in such an event, the applicant had locked the premises and which prevented the Advocate commissioner to take physical possession and in pursuant to such event, application was preferred by the defendant before the Chief Judicial Magistrate Court for permission to break open the locks in order to take the possession of the subject property. The applicant is misleading the Tribunal by stating that the Advocate Commissioner has not taken the possession in time.

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The contention made by the applicant that the defendant bank had denied the opportunity of the applicant to reclaim their assets as provided under section 13(8) is absolutely false and denied. In the possession notice it is specifically referred to the right of the applicant to redeem the property as provided under Section 13(8). The contention that the defendant bank had denied the account statement to the applicant is absolutely false and denied. It is absolutely false to contend that the defendant had not properly credited the amount paid by the applicant and hence denied by this defendant. The defendant bank had credited what all amounts paid by the borrower in the loan account and the defendant bank had never charged any exorbitant interest and had charged only the interest as agreed by the borrowers.

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The contention made by the applicant that the subject property is an agricultural land is absolutely false. No objection was raised by the applicant or borrowers to Annexure - A1 demand notice with regard to the nature of the subject secured asset and hence he is estopped from further contending that the property is an agricultural one. Hence, this Tribunal may be pleased to dismiss the above SA with cost to the defendant.

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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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SA No.342 of 2022

Point:

The availment of credit facilities by the applicant from the defendant bank upon creation of security interest over the immovable property belonging to him and default in repayment of the outstanding loan due has been admitted by the applicant in the SA. Due to the default in repayment of outstanding loan due, loan account of the applicant came to be classified as non-performing asset on 31.03.2019 and SARFAESI proceedings were initiated by the defendant.

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The defendant issued demand notice Annexure – A2 to the applicant calling upon him to repay the outstanding loan due of Rs.55,87,862/- as on 28.06.2020 within 60 days from the date of receipt of the notice. The receipt of the demand notice has been admitted by the applicant. The applicant did not send any representations/objections to the demand notice that the amount claimed in the demand notice is exorbitant and that exorbitant rate of interest has been charged. Hence, the contention of the applicant that the amount claimed is exorbitant and that interest has been exorbitantly is liable to be rejected.

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Since the applicant failed to adhere to the terms of the demand notice, possession notices dated 01.12.2020 Annexure – B1 (Series) was issued to the applicant. The defendant has produced the copies of postal receipts and paper publications to show that possession notices were served to the applicant and that it was widely published in two leading newspapers, as contemplated under Rule 8(2) of the Security Interest (Enforcement) Rules, 2002.

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On application filed by the defendant under Section 14 of the SARFAESI Act 2002 before the Ld. Chief Judicial Magistrate Court, Palakkad, order was passed in M. C. No. 140/2019 appointing Advocate Commissioner for taking physical possession of the secured asset. Pursuant to the above order, the Advocate Commissioner served notice dated 16.06.2022 Annexure – A3 calling upon the applicant to settle the liability before 29.06.2022. Subsequently, the Advocate Commissioner issued another notice dated 07.10.2022 Annexure – A5 (mistakenly mentioned Annexure – A4 in the SA) informing the applicant that he would take physical possession of the secured asset on 26.10.2022.

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Page 6 of 9

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SA No.342 of 2022

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One of the main contentions raised by the applicant in the SA is that since the secured asset is agricultural property, it is exempted from the proceedings under the SARFAESI Act. The rival contention of the defendant is that secured asset is not the agricultural land. The applicant has not filed or produced any material records to substantiate his claim that the secured asset is agricultural land. He also did not raise this issue by sending representation or objection to the demand notice Annexure – A2. If the secured asset had been the agricultural property, the applicant would have sent objection/representation informing the defendant that he should not proceed against the agricultural property. The omission of the applicant to raise this issue at the earliest point of time would show that the present claim of the applicant is only an afterthought. Therefore, the above contention of the applicant is liable to be rejected.

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Another contention raised by the applicant in the SA is that no notice was issued to the applicant prior to passing of order in M. C. No. 140/2019 and that therefore Advocate Commissioner notice dated 07.10.2022 is liable to be quashed. The provisions of Section 14 of SARFAESI Act, 2002 does not mandate the issuance of prior notice to the borrowers or guarantors before passing of order for taking physical possession of the secured asset by the Chief Judicial Magistrate Court or the District Magistrate. Hence, the contention of the applicant in this regard does not hold hood. The Advocate Commissioner issued the notice dated 07.10.2022 as per direction of the Ld. Chief Judicial Magistrate Court, Palakkad in M. C. No. 140/2019. The applicant has not challenged the order of the Ld. Chief Judicial Magistrate Court, Palakkad in M. C. No. 140/2019. Without challenging the above order, the challenging of the Advocate Commissioner notice dated 07.10.2022 is unsustainable. The applicant has not obtained and produced the certified copy of the affidavit filed by the defendant herein and certified copy of the order passed under Section 14 of the SARFAESI Act, 2002 in M. C. No. 140/2019. It is not the case of the applicant that the affidavit filed by the defendant in M. C. No. 140/2019 is not in conformity with the mandatory requirements stipulated under Section 14(1) of the SARFAESI Act, 2002. The applicant has also not averred in the SA that the order passed in M. C. No. 140/2019 is against the provisions of Section 14(1) of the SARFAESI Act, 2002. Therefore, it is evident that the order passed by the Ld. Chief Judicial Magistrate Court,

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SA No.342 of 2022

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Palakkad in M. C. No. 140/2019 is absolutely in conformity with the provisions of Section 14(1) of the SARFAESI Act, 2002. The applicant has failed to prove his case that he is entitled to get the relief sought for in the SA which deserves to be dismissed.

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In view of the foregoing reasons, this Tribunal holds that the applicants are not entitled to get the reliefs sought for in this SA. Accordingly, SA No. 342/2022 stands dismissed with no order as to 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 13^th February, 2023.

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(Su. WILLYAHM) PRESIDING OFFICER

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Page 8 of 9

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SA No.342 of 2022

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List of documents filed by the Applicant along with the application

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S.No.	Date	Particulars	Annexures
1.	---	True photocopy ofthereceipts.	Annexure– A1
2.	29.06.2020	True photocopy of DemandNotice.	Annexure– A2
3.	16.06.2022	True photocopy of notice issued by theAdvocate Commissioner.	Annexure – A3
4.	---	Print out of the proceedings before the Chief Judicial Magistrate Palakkadin M.C. No.9/2022.	Annexure – A4
5.	07.10.2022	Notice issued by the Advocate Commissioner	Annexure – A5

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

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S.No.	Date	Particulars	Annexures
1.	01.12.2020	Copy of possession notice, its postal receipts, publications and postal track report in respect of the possession notice issued to the applicant (series)	Annexure – B1

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(Su. WILLYAHM)

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PRESIDING OFFICER

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Chandran P v. versus South Indian Bank

Case brief

What is this about?

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Chandran P v. versus South Indian Bank

Case brief

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