Allowed

J Santhosh v. Sir M Visvesvaraya Co. Operative Bank Ltd.

DRT18 Aug 2023SA/377/2022

Case brief

AI extract

What is this about?

The DRT allowed the appellant’s appeal under the SARFAESI Act, setting aside the Additional Chief Metropolitan Magistrate’s order allowing the bank to take possession. The bank failed to register its charge and properly serve notices, vitiating the proceedings.

What did the court decide?

The impugned order allowing possession was quashed and set aside. Possession of the schedule property was directed to be restored to the Appellant within fifteen days.

J Santhosh versus Sir M Visvesvaraya Co. Operative Bank Ltd. — Banking and Recovery | DRT (2023)

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IN THE DEBTS RECOVERY TRIBUNAL-I, KARNATAKA AT BENGALURU

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Dated this the 18th day of August, 2023

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Present: Sri. IMTIAZ ALI

presiding Officer

S.A.No.g77/2022

BETWEEN:

Sri J. Santhosh, S/o Jaipal, Aged 44 years, No.386, 1't Floor, 2nd Stage, 6th^phase, 7th Cross, Sri Manjunatha Nagar, Opposite to Mandovi Motors, Shivanagar, Bangalore-560 010

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.. APPELLANT

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AND:

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Sir M. Visvesvaraya Co-operative Bank Ltd., Rep. by its Authorised Officer, Vijayanagar Branch, No.75, Amarjyothi Nagar, Nagarabhavi Road, Bengaluru-560 040 ..

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.. RESPONDENT

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Counsels on record/aooeared for: Appellant : Sri R. Ashok Kumar Respondent : Sri Dileep N.

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FINAL ORDER

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The Appellant has filed the present Appeal under Section 17 of the SARFAESI Act, 2002 (for short '.Act,,), seeking for setting aside the impugned order dated 3O.O5.2O22 passed by the Learned 39th Additional Chief Metropolitan Magistrate, Bengaluru in C.Misc.No.2 657 /2022, in respect of the schedule property for recovery of

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S . A.No .37 7 12022

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RS.7,3O,OO,OOO/- along^{withinterestthereon, charges,cost} etc.

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The facts leading to the^{present Appeal in a nutshell} are that, the Appellant^{is a borrowerto the financial facilities} extended by the Respondent^{Bank. The Appellant claimsthat} he was not served with^{demand notice and possession notice} as contemplated under the^{provisions of Act and therules} made thereunder; the^{declarationof NPA was duringthe} moratorium^{period declared by the Nlinistry of Financeand} Reserve Bank of India due to^{COVID-19 and contrary to RBI} guidelines; the entire^proceedings are contrary to^Section 2(oxa)(b), Section 14(1X2)(b)(i)^{to (ix), Section26(D) of} the SARFAESI Act, 2002^{read with Security Interest} (Enforcement) Rules,2OO2 more specifically^{Rule 3(1Xa),} 8(1)(2)(2-A); in view of^{countrywide lockdown,tlmely} repayment did not happen,^{livelihoodwas very badiy affected} resulting in temporary non-compliance of^contractual obligations; the impugned^{order is contrary to the provisions} of the Act; the application^{schedule property is under} occupancy of four tenants^{and no notice was served to the} tenants before obtaining the order;^{the affidavit in support of} the Appellant under Section^{14 of the Act before the court} below is contrary to law and the tenants are^illegally dispossessed by the Respondent^{Bank;the impugnedorder}

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S-A-No-37712022

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is defective and not-executable on the face of it; the Respondent Bank did not disclose the procedural lapses violation under Rules 3(1) to (5), 8(1) to (2) of Security Interest (Enforcement) Rules,2002. The grounds urged by the Appellant for the main reliefs are, the Respondent did not disclose the procedural lapses before the ACMl.4 court; the entire proceedings are contrary to Section 2(o)(aXb), Section 14(1X2)(bXi) to (ix), Section 26(D) of the SARFAESI Act, 2OO2 r/w Security Interest (Enforcement) Rules, 2OO2 more specifically Rule 3(1X4), B(1)(2X2-A); Respondent Bank did not approach the 39th ACN4M, Bengaluru in Crl. Misc. No.2657 /2022 dated 30.05.2022 with clean hands; suppressio veri, suggestio falsi: the Respondent Bank had suppressed the tenancy details before the 39th AC[4M, Bengaluru in Crl. Misc. No.2657 /2022 filed by the Respondent Bank against the Appellant and further, the impugned order is defective and not executable on the face of it. Further ground urged is that the Learned Magistrate had failed to verify the evidence on record before passing the order which suffers apparent error from the face of records. With the above contentions and on the foregoing grounds, the Appellant has sought to set aside the impugned order passed by the Learned ltagistrate in respect of the application schedule property.

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5 . A.No .37 7 12022

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Upon service^{of notice, the Respondent Bank entered} appearance through^{its counseland subsequentlyfiled} detailed objection to^{the SecuritisationApplication with} photocopies of loan application,^{loan Sanctionletter,} mortgage deed,^{statementof account,demand notice,} possession notice, paper^{publications, tenantnotice,} impugned order,^{mahazar report, lease agreementand} photographs of each floors vide Annexures-Rl^{to R17.}

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It is the case of the^{RespondentBank that the} Respondent Bank on^{the applicationof Appellantas a} principal borrower and his wife Smt.^{Ushaas a co-applicant} sanctioned Term^{Loan of Rs.1,88,64,000/- on the security of} the schedule^{propertyby way of deposit of title deeds. It is} contended that the^{Appellant and his wife werenot promptin} repayment of EMIS, in^{viewof which,the loan account was} classifled as Non-Performing^{Asset (NPA) on 09.04.2013.} When the Appellant and^{his wife becamewillfuldefaulters,} the Respondent Bank^raised a^{dispute before the Joint} Registrar of Co-operative^{SocietiesinJRB/Dispute} No.106712013-14 under Section⁷⁰ of^KarnatakaCo- operative Societies Act, 1959^{which came to be allowed vide} order dated 25.O7.2Of7.

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The Respondent Bank also issued demand^notice dated 21.09.2021 under Section 13(2) of the^{Act demanding}

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s. a.No -37 7 12022

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a sum of Rs.7,26,56,45U- which is stated to have been returned unserved as the Appellant is stated to have refused to receive it. The Respondent Bank stated that it has annexed copy of the demand notice and returned RPAD cover vide Annexure-R6-series. It is stated that despite service of demand notice, the Appellant neither paid the amount as shown in the demand nouce nor filed any objection within statutory period of 60 days from the date of demand notice. Hence, the Respondent Bank issued possession notice dated 29.O3.2022 under Section 13(4)(a) of the Act; duty served it on the Appellant and thereafter duly published the possession notice in both English and Kannada daily newspapers on O2,O4,2022 vide Annexures-R7 to R9; issued tenant notice on 21,,05.2022 to the occupants of the mortgaged property vide Annexures-R10(a) to (d) and none of them has resisted or approached this Tribunal seeking any relief upon the tenant notice, Thereafter, the Respondent Bank by virtue of the impugned order passed by the Learned Magistrate, took physical possession of the mortgaged property and the occupants of the schedule property surrendered physical possession of the mortgaged property after having taken back their materials and goods kept therein. Respondent Bank submitted that the procedure followed by it was in accordance with the provisions of the Act and sought for the dismissal of the Securitisation

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S.A.No.377l2022

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Application and to^{permitit to take recourse of the measures} as specified under the Act to^{recover the secured debt along} with all costs, charges and^{expensesincurred by it so far, in} the interest of^justice.

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On the above background, I^{have gone throughthe} available records and heard the arguments^addressedby Learned Counsels appearing for^both the^{parties, and the} following^points arise for my consideration

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(a) Whether the Appellant has made out the case to allow the appeal? and

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(b) To what relief, the^parties are entitled?

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REASONS

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This appeal has been filed by the Appellant for setting aside the impugned order dated 30.O5-2O22^passed by the Learned 39th Additional Chief Metropolitan Magistrate, Bengaluru under Section 14 of the SARFAESI Act, 2002 in C.l.4isc. No.265712022, in respect of the schedule^property and also sought as an interim relief to restore the^physical possession of the schedule property back to the Appellant. Appellant in the appeal memo, inter alia, would contend that the Appellant was not served with demand notice and that the impugned order is defective and not-executable on the face of it and further that the Respondent Bank did not disclose the

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S.A.No-377/2022

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procedural lapses and violations of Rules 3(1) to (5), 8(1), (2) and (2-A) of Security Interest (Enforcement) Rules, 2OO2 and also Section 26(D) of the SARFAESI Act, 2002. To know the veracity of the contentions of the Appellant, the copies of the documents produced by the Respondent Bank along with copy of the demand notice under Section 13(2) of the Act vide Annexure-R5 series were verified and it is observed that the returned RPAD cover stated to have been annexed to the statement of objections filed by the Respondent Bank to the main is not actually annexed. The contentions of the Respondent Bank that the Appellant refused to receive the demand notice appears to be incorrect. If the Respondent Bank/Authorized Officer has reason to believe that the borrower is avoiding the service of the notice or that for any other reason, the service cannot be made as defined in Rule 3(1) of Security Interest (Enforcement) Rules, 2002, the service should have been effected by affixing a copy of the demand notice on the outer door or some other conspicuous part of the house or building in which the borrower or his agent ordinarily resides and also by publishing the contents of the demand notice in two leading newspapers, one in vernacular language, having sufficient circulation in that locality. In the case in hand, the Respondent Bank has just stated that the Appellant had refused to receive the demand notice dated 27.09.2021 and also stated that returned RPAD

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A.No^{.37 7} 12022

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cover is annexed. To^{substantiatethis, there isno} documentary evidence.^{Further, the Appellant hasraised} contentions that Respondent^{Bankhas violated Sectlon 26(D)} of the SARFAESI Act,^{2OO2 and Rule 8(1) of the Security} Interest (Enforcement)^{Rules,2Oo2.It is apparentfrom the} materials on record that^{Respondent Bank has not registered} its charge over the schedule^{property with theCentral} Registry as mandated under^{Section 25-D of the Act and also} failed to^{produceproof of affixtureof possessionnotice dated} 25.Of.2o22 on the outer door^{or at suchconspicuous place of} the secured asset. Any deviation^{and non-complianceof said} procedures would vitiate the action initiated by the secured creditor. Respondent Bank in its^statement of^{objections to} the main contended that the^{procedurefollowedby} it^{was in} accordance with the^provisions of the Act is factually incorrect and therefore rejected. Hence, for the sole reasons that the Respondent Bank has not complied with the aforesaid provisions of the SARFAESI Act, 2002 and the Security Interest^{(Enforcement)} Rules, 2002, this appeal deserves to be allowed. I, therefore,^pass following:

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ORDER

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In the result, S.A.No.377/2022 stands allowed quashing and setting aside the order dated 30.05.2022 passed by the Learned 39th

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5.A.No.377 /2022

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Additional Chief Metropolitan Magistrate, Bengaluru under Section 14 of the SARFAESI Act, 2002 in C.Misc.No.2657l2O22, in respect of the schedule property.

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Respondent Bank is directed to re-deliver the possession of the schedule property to the Appellant within fifteen days from the date of this order. Respondent Bank is further directed not to burden the Appellant with the expenses hitherto incurred for publication and other charges incurred in connection with the enforcement of security interest.

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Respondent Bank is at liberty to take measures afresh from the stage of demand notice in accordance with law subject to CERSAI registration.

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There will be no order as to cost.

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(Dictated to the Stenographer, after its transcription and necessary corrections, signed and^pronounced by me in the Open Court on this 1Bu day of August 2023)

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,su" (IMTIA2 ALI) PRESIDING OFFICER DRT-I, BENGALURU

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+ash+

J Santhosh v. Sir M Visvesvaraya Co. Operative Bank Ltd.

Case brief

What is this about?

What did the court decide?

J Santhosh v. Sir M Visvesvaraya Co. Operative Bank Ltd.

Case brief

What is this about?

What did the court decide?

What the court decided

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