Dismissed

Mustaf Mohiuddin Jeelano Alias M M Jeelani v. South Indian Bank

DRT23 Jun 2023SA/486/2022

Case brief

AI extract

What is this about?

The Debt Recovery Tribunal dismissed an appeal filed by a borrower against an impugned order of the Additional Chief Metropolitan Magistrate extending the time for taking physical possession of secured property. The Tribunal held that Section 14 of the SARFAESI Act is an enabling section empowering the Magistrate only to assist in taking possession and not to adjudicate disputes.

What did the court decide?

The appeal SA No.486/2022 was dismissed; interim orders vacated; no order as to costs.

Mustaf Mohiuddin Jeelano Alias M M Jeelani versus South Indian… — 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 day 23d of June,2023

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Present: Sri IMTIAZ ALI

Presiding Officer

S.A.No.486/2O22

BETWEEN:

Sri Mustafa Mohiuddin Jeelani @ M.M Jeelani S/o. Shabir Ahmed Jeelani Aged about 39 years No.530, 12th Cross RMV II Stage, Dollars Colony, Bangalore 560 094

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... APPELLANT

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AND:

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The South Indian Bank Limited Represented by its Authorised Officer SIB Arcade, No.61 Wheelers Road, Cox Town Bangalore 560 005

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... RESPONDENT

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Counsels on record/aooeared for: Appellant : Sri Srikrishna Respondent : Sri Narayana shenoy

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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 quashing/setting aside the order under Section 14 of the Act passed by the Learned VIII Additional Chi"f Metropolitan Magistrate, Bengaluru in Crl. Misc. No.24/20L8

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SA No.486/2022

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\ I\r,,

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dated 07.07.2022 in respect of the Schedule Property for Rs.7O,02,662l- along with recovery of loan amount of interest thereon, charges, cost etc.,

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The facts of the case of the Appellant in a nutshell are, the Appellant is a Borrower/Mortgagor. The Respondent claims that a Housing Loan of Rs.60,00,000/- and Mobi loan of Rs.5,00,000/- were sanctioned to the Appellant in the year 2014. The Housing Loan was secured by mortgage of the immovable schedule property belonging to the Appellant. The Mobi Loan is an un-secured loan.

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That the Appellant stated that according to the Respondent, the Housing Loan has become NPA with effect from 01.05.2018 and therefore, a Demand Notice dated 19.06.2018 was issued, demanding the borrower to repay the sum of Rs.61,05,458/- which is due in Housing Loan. Further, according to the Respondent Bank, Possession Notice dated 11.09.2018 also was issued, however, the liability was not repaid by the Appellant and therefore, the Respondent Bank has approached the Learned VIII Additional Chief Metropolitan Magistrate, Bengaluru with petition under Section 14 of the SARFAESI Act by filing petition in Crl. Misc. t"to.Z 4/2OlB. The Appellant stated that while filing the

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SA No.486/2022

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petition under Section 14 of SARFAESI Act, the Respondent Bank has also included the unsecured Mobi Loan also in its claim and sought order for taking possession of the schedule property to remove the liability in Loans. The very claim of Respondent Bank before the learned VIII Additional Chief Metropolitan Magistrate Bengaluru, for recovery of un secured loan under the provisions of SARFAESI Act is not maintainable.

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The Appellant further stated that the learned VIII Additional Chief Metropolitan Magistrate, Bengaluru initially by order dated 02.02.2019 has allowed the petition by appointing a Court Commissioner and directing the Court Commissioner to take physical possession of the schedule property with assistance of jurisdictional police and to handover physical possession of the schedule property to the Authorised Officer of the Respondent Bank. Subsequently, by another order dated 03.05.2019, the period for executing the commission warrant was extended by two months. At present, by the impugned order dated 07.07.2022, the learned VIII Additional Chief Metropolitan Magistrate, Bengaluru, an advocate was appointed to take physical pbssession of the schedule property with assistance of jurisdictional police and to handover physical possession of

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SA No.486/2022

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the schedule property to the Authorised Officer of the Respondent Bank. The Appellant contended that impugned order is unjust, incorrect and illegal. In light of the foregoing contentions and the grounds urged, the Appellant has sought to allow the present appeal as prayed for.

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Upon service of notice, the Respondent Bank entered appearance through its counsel and subsequently filed detailed statement of objections to the Appeal. The Respondent Bank stated that the present appeal is not maintainable either in law or on facts and the same is liable to be dismissed in limine. The present SA is hit by Res Judicata. The Appellant has sought to challenge the order dated 07.07.2022, which is nothing but an extension of the order dated 02.02.2019. The Appellant has already preferred Diary No.2623/2019 (in SA) challenging the order dated 02.02.2019 which came to be dismissed on 26.02.2021. The Appellant ought to have stated about the filing of the previous SA and its dismissal. Further the Appellant has filed a writ petition before the Hon'ble High Court of Karnataka challenging the order of dismissal dated 26.02.202L passed in Dairy No.2623/2O19 (inadvertently mentioned by the Respondent

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SA No.486/2022

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Bank as 2021) (in SA) which is numbered as WP No.6452/2021, and the same is pending for hearing. The Appellant ought to have stated the filing of the Writ Petition before the Tribunal.

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The Appellant approached the Respondent Bank for grant of Housing Loan and accordingly the Respondent sanctioned Housing Loan of Rs.60,00,000/- as per the terms and conditions mentioned in the sanction intimation letter dated 20.12.20L4.

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The Respondent further contended that the Appellant and the Guarantor have utilized the above Housing Loan made and failed and neglected to servlce the said loan facilities and also defaulted in complying with the terms and cbnditions of the loan agreement and sanction, despite repeated letters and reminders from the Respondent Bank. Therefore, the account has been declared as Non-Performing Asset on 01.05.2018 as per the RBI guidelines. The Respondent Bank has issued Demand Notice dated 19.06.2018 under Section 13(2) of the SARFAESI Act. Since, the Appellant failed to repay the amounts within statutory

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SA No.486/2022

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period of 60 days, the Respondent Bank through the Authorised Officer, in terms of Section 13(4) took symbolic possession of the secured assets by affixing the possession Notice on the outer wall of the schedule property on 26.09.2018. The Possession Notice and panchanama are both dated 26.09.2018. The Respondent Bank has published Possession Notice in the "The New Indian Express,, English daily and "Kannada Prabha" Kannada daily on 29.Og.2}tg. Thereafter, the Respondent Bank has preferred an application before the Learned ACMM and obtained an order for police assistance for taking physical possession of the secured assets which was allowed vide order dated 02.02.2019. That the Appellant is due and liable to pay the Respondent, a sum of Rs.75,68,859/- due as on 06.09.2022 along with interest and penal interest at the agreed rates.

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Wherefore, the Respondent Bank prayed for the

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dismissed of the SA fited against the proceedings initiated by the Respondent Bank under the SARFAESI Act, holding that the Respondent has complied with the provisions of the SARFAESI Act and proceedings are valid and proper and also

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SA No.486/2022

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to direct the Appellant to pay exemplary and prohibitive costs

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t0 the Respondent Bank.

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On the above background, I have gone through the records of the case and heard the arguments advanced by 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 a case

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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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After hearing the learned Counsels for the parties and on considering the materials on record, it is seen that the Appellant had applied for loan and the same was sanctioned, which means the loan was approved. Such loan sanction suggested that it was only the approval of the loan and not the disbursal of funds. The Bank issued the sanction letter when the loan was approved after verifying the details of the Appellant like address, income, credit history, assets etc.,. The sanction letter also included the details such as

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SA No.486/2022

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sanctioned loan amount, loan tenure, interest rate, EMI etc. Disbursement of loan was done by the Bank after verification and approval. When the Bank has sanctioned, it does not mean that the whole amount of sanctioned loan will be disbursed without any further checks. In the instant case, the bank has disbursed an amount of Rs.60 lakhs and the sanction amount was of Rs.60 lakhs. Therefore, there is nothing to show that the Appellant is aggrieved for availing,of the sanctioned loan. In the meanwhile, the Respondent Bank has found the Appellant to be a defaulter in making repayment of the loan amount. Accordingly, the Respondent Bank has declared the loan account as NpA. Thereafter, the Respondent Bank issued a Demand Notice on 19.06.2018 for an amount of Rs.61,05,458/- as on 24.05.201g payable by the Appellant within 60 days under Section 13(2) of the SARFAESI Act. The said Demand Notice was served on the Appellant which would be evident from Annexures-R7 and Rg. The Appellant did not submit any objection/representation against the said Demand Notice. Thereafter, Respondent Bank has taken symbolic possession of the Schedule property by issuing the Possession Notice dated 26.09.2018 under Section 13(4) of the SARFAESI Act. Annexures-R12 shows that the

SA No.486/2022

said Possession Notice was published in two newspapers namely, "Kannada Prabha" and "The New Indian Express,, respectively. Due to failure on the part of the Appellant to clear the loan amount, the Respondent Bank obtained the impugned order dated 07.07.202t for taking physical possession in terms of earlier order dated 02.02.2022 passed by the Learned VIU Additional Chief Metropolitan Magistrate. This appeal has been filed by the Appellant for quashing and setting aside the impugned order dated 07.07.202L passed by the VIII Additional Chief Metropolitan Magistrate, Bangalore in Crl. Misc. No.24/20t8. The Appellant himself claimed that he is the borrower to the loan advanced by the Respondent Bank. As such, the Appellant has /ocus standi to file the present application against the Respondent Bank, questioning the action initiated by the Respondent Bank for enforcement of security interest. It is the contention of the Appellant that tfle Respondent Bank has acted in total violation and ultra vires to the Act and has not followed the procedures laid down therein and the^proceedings initiated by the Respondent are illegal, arbitrary and unjust and are liable to be set aside. Rebutting the contentions and grounds of the Appellant, the Respondent has contended that Appellant who is Borrower

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SA No.486/2022

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had failed to pay the dues within the stipulated time and thus, in terms of the SARFAESI Act, his account became a NonPerforming Asset on 01.05.2018; on 23.06.2018, the Respondent Bank served on him the notice under Section 13(2) of SARFAESI Act calling upon the Appellant to make payment of the outstanding loan amount of Rs.61,05,45g/due as on 24.05.2018 within 60 days from the date of notice. On failure of the Appellant to clear the loan dues within the stipulated statutory period of 60 days, the Respondent Bank served on him notice under Section 13(4) of SARFAESI Act and took symbolic possession of the schedule property; after taking symbolic possession of the secured asset, published the possession notice in two leading newspapers viz.^,'The New Indian Express", English Edition and ',Kannada prabha", Kannada Edition, both dated 29.09.2018 in compliance of the provisions of the Act and the Rules framed thereunder; filed an application before the Learned VIII ACMM, Bangalore which came to be allowed vide order dated 02.02.2019 and got Court Commissioner appointed to take possession of the mortgaged properties. Respondent Bank contended that every step and action till date initiated by the Respondent Bank is under due process of law to recover its dues. It is observed

SA No.486/2022

thattheRespondentBankhasinitiatedrecoveryproceedings right from^{the stage of issuanceof demand notice up to the} stage of^{obtainingLearned Magistrate'sorder in accordance} with the^{provisionsof the Act and Rules' It is seen that the} authority^{of VIII Additional Chief Metropolitan Magistrate'} Bangalore^{who was called upon to act under Section 14 of the} SARFAESI^{Act had onlyassisted the securedcreditor in taking} possession of^{the secured asset'The dispute raised by the} Appellant^{regarding the secured asset cannotbe dealtwith by} thesaidauthority,withouthearingtheAppellantisofno consequence^{since there is no mandatory requirementof} hearing^{the Appellant at the time of passing the impugned} order'^{The VIII AdditionalChief MetropolitanMagistrate'} Bangalore^{being the authority had to relegatethe aggrieved} person to seek^{remedyunderthe SARFAESIAct after order of} possession^{was passed' It is evidentthat Section14 of} SARFAESIActisanenablingsectionwhichempowers Magistrate^{only to assist the securedcreditor in taking} possession of^{the securedassetand as such' the power} v.estedintheMagistrateislimitedandspecific.Aplain reading^{of Section 14 of SARFAESI Act demonstratesthat it} doesnotclothetheMagistrateWithpowertoundertakeany

SA No.486/2022

adjudication in the assets. Hence, the dispute raised regarding the secured assets by the Appellant herein asking for a direction to set aside the order dated 07 .07.2022^passed by the Learned VIII Additional Chief Metropolitan Magistrate, Bangalore for appointment of Court Commissioner to execute the earlier order dated 02.02.20t9 cannot be gone into since the impugned order was^just an extension of the earlier order. It is more so that the challenge made by the Appellant with regard this order dated 02.0220L9 was dismissed by this Tribunal, The order passed by the VIII Additional Chief Metropolitan Magistrate shows that the authority had examined the assertions made by the Respondent Bank the order in^question was^passed regarding taking of possession of the assets by granting six months' time to executed the earlier order. Thus, the VIII Additional Chief Metropolitan Magistrate, Bangalore has passed a legal order within his jurisdiction. Therefore, contentions and grounds urged in the appeal are not factually correct and the Respondent Bank has complied with all the provisions of the Act and Rules while taking the measures and the same are hereby declared and held valid. The appeal is, thus, without merits and hence liable to be dismissed. I, therefore, pass following:

SA No.486/2022

ORDER

In the result, SA No,486/2022 is dismissed.

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Interim order, if any, stands vacated. Pending

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IAs, if any, also stand closed.

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There will be no order as to cost,

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(oictateO to the Stenographer, after its transcription and necessary corrections, signed and^pronounced by me in the Open Court on this 23.d day of lune, 2023)

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\ o' o You (rMTrAZ ALr) PRESIDING OFFICER DRT.I, BENGALURU

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{rsrr)

Mustaf Mohiuddin Jeelano Alias M M Jeelani v. South Indian Bank

Case brief

What is this about?

What did the court decide?

Mustaf Mohiuddin Jeelano Alias M M Jeelani v. South Indian Bank

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

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