Dismissed

Mohammed Ali M K v. Federal Bank

DRT24 May 2023SA/557/2022

Case brief

AI extract

What is this about?

The Tribunal dismissed a secutrisation application challenging Section 13 notices and an inspection notice under Section 14 of the SARFAESI Act, 2002. The court held that the challenge to the possession notice was time-barred, the sanction letter did not invalidate prior proceedings, and the inspection notice was not maintainable.

What did the court decide?

Application for setting aside notices and restraining possession dismissed. No costs awarded.

Mohammed Ali M K versus Federal Bank — Money Laundering | 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 24^th DAY OF MAY, 2023

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

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S.A No.557 of 2022

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Between

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Mohammed Ali M.K., S/o Kunheen, Mudikunnil, Thazhekode, Perinthalmanna, Malappuram District.

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Ayshakutty, W/o. Mohmmed Ali, Mudikunnil, Thazhekode, Perinthalmanna, Malappuram District.

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--- Petitioners/Applicants

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And

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Federal Bank Limited, Karinkallathani Branch, Thazhekode Post, Perinthalmanna.

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The Branch Manager, (Authorised Officer), Federal Bank Ltd., Karinkallathani Branch, Thazhekode Post, Perinthalmanna -679 357.

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--- Respondents/Defendants

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This petition coming on 19.04.2023 for hearing before me in the presence of Ms.Greeshma Chandrika, Advocate for the Applicants and Ms.Ruby Paulose, Advocate for the defendants and upon hearing arguments of learned counsels for all the parties and upon perusing the material on records, this Tribunal delivered the following:

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SA No.557 of 2022

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O R D E R

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This Securitisation Application was filed on 16.11.2022 seeking to pass an order setting aside Annexure-4 notice dated 07.02.2018, Annexure-5 notice dated 12.02.2019 and Annexure-6 Advocate Commissioner notice dated 20.09.2019 and restraining the defendants 1 and 2 from proceeding further with Annexures-4, 5 and 6 notices including taking possession of mortgaged properties pursuant thereto and allow the cost of the proceedings.

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

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The 1^st applicant availed cash credit facility of limit of Rs.1,15,00,000/- from the Federal Bank Ltd. (Bank for short). The 2^nd applicant is the wife of the 1^st applicant and a co-obligant in the credit arrangement vide letter of sanction of credit facility dated 20.02.2019, Annexure-A1. The 1^st applicant availed the said facilities from the 1^st defendant Bank, for the first time in the year 2015. A true copy of the initial Agreement of Cash Credit/Overdraft/Demand Loan entered into between the 1^st applicant and the Bank on 18.12.2015 is Annexure-2.

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On 01.08.2019, the 1^st applicant was informed through the letter dated 01.08.2019, Annexure-A3 that the loan account of the 1^st applicant was irregular since 31.07.2019. The 1^st applicant was called upon to remit the entire amount due to the 1^st defendant Bank within 30 days of receipt thereof.

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The 1^st applicant account was classified as Non-Performing Asset on 28.12.2017. The 2^nd defendant issued notice under Section 13(2) of the Act on 07.02.2018. This was followed by the issuance of notice of possession dated 12.02.2019 under Section 13(4) of the Act. True copies of notice dated 07.02.2018 and 12.02.2019 are produced as Annexure-4 and Annexure-5. However, the 1^st applicant overcame the same hurdles and consequently, the 1^st defendant issued Annexure-1 sanction letter on 20.02.2019, on the same terms as Annexure-2. Since the defendant Bank issued Annexure-1, the earlier proceedings initiated under the Act are no longer valid.

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The 1^st applicant filed W.P. (C) No.31645 of 2019 before the Hon'ble High Court of Kerala for declaration of its invalidity. The said writ petition was, inter alia, dismissed in view of existence of alternate remedy before this Hon'ble Tribunal. W.A. No.1403 of 2020 filed challenging the said judgment was also unsuccessful on the ground of lack of maintainability of the said challenge before the Hon'ble High Court of Kerala.

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Page 2 of 9

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SA No.557 of 2022

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In the year 2022, the 1^st defendant filed O.A. No.80/2022 before the Debts Recovery Tribunal-II Ernakulam for the issuance of a recovery certificate for a sum of Rs.2,03,54,274.87. During the pendency of the same before this Hon'ble Tribunal, the applicants were served with a notice dated 20.09.2022, Annexure-A6 by an Advocate Commissioner purportedly pursuant to proceedings in CMP No.432/2021 before the Chief Judicial Magistrate, Manjeri. In the said notice, the applicants were given intimation regarding the inspection of petition schedule property. On the receipt of Annexure-6 notice, the applicants filed an injunction application, Annexure-A7 in O.A. No.80/2022 seeking an order of injunction restraining the defendant bank from taking possession or alienating the property till disposal of O.A. No.80/2022. However, the defendants have forcefully taken possession of 42.25 cents in Sy. No.457/3 of Anakkuparambu village, Perintalmanna Taluk, Malappuram, together with building. The applicants were residing in the said property, along with family consisting of 9 members (4 children aged between 9 months to 12 years). The applicants, together with their family, are now on the streets. Aggrieved by the illegal act of the defendants, the 1^st applicant filed a writ petition numbered as W.P. (C) 35417/2022 before the Hon'ble High Court of Kerala. On 10.11.2022 the writ petition was dismissed as withdrawn. True copies of the judgment dated 15.09.2020 in W.P. (C) 31645/2019 and the judgment dated 29.10.2020 in WA No.1403/2020 are produced as Annexure-8 and 9 respectively.

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There is non-compliance of the mandatory provisions of the Act. The inspection notice issued by the Advocate Commissioner is without perusal of the records and without compliance of the statutory provisions. No fair opportunity was given to the applicants before taking of possession of their residential property. The applicants having aggrieved by the illegal act of defendants 1 and 2, have filed this S.A.

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The defendants came on record and filed Reply Statement interalia contending as follows :

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The applicants have availed a cash credit limit of Rs.115 lakhs on 18.12.2015. The dues as on 29.12.2022 is Rs.2,82,88,886/- in the aforesaid account. The Bank has already approached this Hon'ble Tribunal by filing OA. No.80/2022.

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The Bank has taken physical possession of 42.25 cents along with the residential building situate therein in Sy. No.457/3 of Anakkuparamba village, Perinthalmanna Taluk, Malappuram. The valuation report of the aforesaid property is produced as AnnexureB1. The remaining mortgaged properties are :

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Page 3 of 9

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SA No.557 of 2022

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(i) 2 cents in Sy. No.200/12 of Thazhekode village, Perintalmanna Taluk, Malappuram District, Kerala State within the registration Sub District of Perinthalmanna together with commercial building No.XV/756 of Thazhekode Grama Panchayat.

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(ii) 38.25 Cents of land in Sy. No.456 of Arakkuparamba village, Perinthalmanna Taluk, Malappuram District, Kerala State pertaining to jenmam assignment deed No.4073/2002 dated 09.12.2002 of SRO, Melattur.

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Copies of the Valuation Reports of the above three properties are produced as Annexure-B2 and B3 respectively.

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The property mentioned as at Sl. No.(iii) above being agricultural land is not proceeded with under Section 14 of the SARFAESI Act. The applicants have not been making any payments towards repayments in order to reduce/settle/close the liability owned by him. The 1^st applicant has been diverting the sale proceeds through accounts maintained by him with other Banks. The copy of statement of account in respect of the ODCC A/c No.16605500002827 as on 16.01.2023 is produced as Annexure-B4.

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The contention that by virtue of Annexure-A1 sanction the Section 13(2) and 13(4) notices issued have become redundant was raised before the Hon'ble High Court of Kerala and has not found favour with the aforesaid court. Annexure-A1 sanction is only a review of sanction for enabling the branch to take fresh documents after renewing the account, in the event of the applicants making the account standard.

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Applicants were granted a cash credit facility and the same had become NPA as on 28.12.2017. Hence Section 13(2) notice was issued to him on 07.02.2018 and possession of the property was taken on 12.02.2019. Annexure-A6 notice was issued by the Advocate Commissioner in pursuance of the order passed by the CJM Manjeri. Neither the aforesaid order under Section 14 of the SARFAESI Act, nor the proceedings initiated by this defendant under Section 14 are impugned in this SA and hence the applicants are not entitled to raise any objections in respect of Annexure-A6. Annexure-A7 is not at all maintainable in O.A. No.80/2022 and the same ought to be dismissed in limine.

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The defendant is entitled to take physical possession of the properties. Annexure-A6 notice is not statutory and it is settled law that the Commissioner appointed by CJM need not issue any notice to the borrower before taking possession of the property. The challenge

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Page 4 of 9

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SA No.557 of 2022

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against Annexure-A6 is unsustainable as the said notice is not statutory in nature and is not issued by this defendant.

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The applicants are not entitled to be restored possession of 42.25 cents in Sy. No.457/3 of Anakkuparambu village, Perinthalmanna Taluk, Malappuram district together with the building therein unless the liability due to this defendant is wiped off. None of the reliefs prayed for are liable to be granted. Therefore, the above S.A be dismissed with cost of this 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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Point: Availment of cash credit facility of limit of Rs.1,15,00,000/-from the 1^st defendant bank in the year 2015 as per Annexure-A1 letter of sanction of credit facility and the 2^nd applicant being the co-obligant for the aforesaid credit facility has been admitted by the applicants in the S.A. A perusal of Annexure-A3, copy of letter issued by the 1^st defendant Bank to the applicants shows that the aforesaid credit facility availed by the applicants has become irregular and that the applicants had been called upon to remit the entire amounts due within 30 days from the date of receipt of the letter. Admittedly, the applicants did not respond to the terms of AnnexureA3 letter. Hence the accounts of the applicants was classified as NonPerforming Asset on 28.12.2017 and the demand notice dated 07.02.2018, Annexure-A4 was served to the applicants and subsequently the possession notice dated 12.02.2019, Annexure-A5 was issued by the 2^nd defendant.

¶45

The contention of the applicants that since the consequent issuance of sanction letter, Annexure-A1 on the same terms as Annexure-A2 agreement, the earlier proceedings initiated under the SARFAESI Act, 2002 are no longer valid, has been stoutly refuted by the defendants in their written statement. It is the contention of the defendants that the same contention raised by the applicants before the Hon'ble High Court of Kerala in W.P.(C) No. 31645/2019 was not considered and that Annexure-A1 sanction is only a renewal for sanction for enabling the 1^st defendant Bank to take fresh documents after renewing the account, in the event of applicants making the accounts standard. The applicants have not produced any material before this Tribunal to substantiate their contention that issuance of Annexure-A1 sanction letter on the same terms as Annexure-A2, the earlier proceedings initiated under the SARFAESI Act, 2002 are no longer valid. Therefore, the above contention of the applicants is unsustainable.

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Page 5 of 9

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SA No.557 of 2022

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It is seen from the perusal of the written statement of the defendants that the defendants have taken physical possession of the property measuring 42.25 cents along with residential building situated in Sy. No.457/3 of Anakkuparambu village, Perinthalmanna Taluk, Malappuram District belonging to the applicants and that since the property measuring to 38.25 Cents of land in Sy. No.456 of Arakkuparamba village, Perinthalmanna Taluk, Malappuram District, Kerala State pertaining to jenmam assignment deed No.4073/2002 dated 09.12.2002 of SRO, Melattur, belonging to the applicants has not been taken physical possession on the ground that this property is agricultural property and that on application filed by the defendants under Section 14 of the SARFAESI Act, 2002 before the Chief Judicial Magistrate Court Manjeri, Order was passed in CMP No.432/2021 appointing Advocate Commissioner to take physical possession of the remaining secured asset. Pursuant to the above direction, Advocate Commissioner issued Annexure-A6 notice to the applicants informing them that he would inspect the petition schedule property on 20.09.2022.

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The applicants have merely contended in the S.A. that there is non-compliance of mandatory provisions of the SARFAESI Act, 2002 and that inspection notice issued by the Advocate Commissioner is without perusal of the records and without compliance of the statutory provisions and that no fair opportunity was given to the applicants before taking possession of their residential property. The applicants have not produced the true copies of the petition and the affidavit filed by the defendants before the Chief Judicial Magistrate Court Manjeri and the Order passed by the learned Chief Judicial Magistrate Court Manjeri along with the S.A. It is also not the contention of the applicants that mandatory requirements contemplated under Section 14(1) (i) to (ix) of the SARFAESI Act, 2002 has not been complied with in the affidavit filed under Section 14 (1) of the SARFAESI Act, 2002.

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Possession notice dated 12.02.2019 was issued by the defendants but the applicants did not challenge the above possession notice by filing S.A. within the stipulated period of 45 days from the date of issuance of the possession notice. Instead, they filed this S.A. on 16.11.2022 challenging the possession notice and also issuance of Annexure-A4 demand notice and Annexure-A6 inspection notice. It is also not the contention of the applicants that, possession notice, Annexure-A5 issued not in accordance with the provisions of the SARFAESI Act, 2002 and the Security Interest (Enforcement) Rules 2002. In any event, the challenge of the possession notice, AnnexureA5 by the applicants beyond the period of limitation is unsustainable. As such the applicants are not entitled to possession of the residential

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Page 6 of 9

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SA No.557 of 2022

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property which has already taken possession by the defendants pursuant to issuance of Annexure-A5.

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The applicants did not file any objection/representation to the demand notice dated 07.02.2018, Annexure-A4. The applicants have also not challenged the order of the learned Chief Judicial Magistrate Court, Manjeri for taking physical possession of the secured asset on the ground that the affidavit filed by the defendants under Section 14(1) of the SARFAESI Act, 2002 suffers from want of compliance of mandatory requirement as stipulated under Section 14(1) (i) to (ix) of the SARFAESI Act, 2002. Advocate Commissioner issued notice, Annexure-A6 pursuant to the direction given to him by the learned Chief Judicial Magistrate Court Manjeri. Hence Annexure-A6 notice cannot be challenged in any manner. In any event, the applicants have miserably failed to prove their case that they are entitled to get the reliefs sought for in the S.A.

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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.

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In the result, this S.A No. 557 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 24^th May, 2023.

(Su. WILLYAHM)

PRESIDING OFFICER

Mj/

Page 7 of 9

SA No.557 of 2022

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

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Sl.	Date	Particulars
No.
1.	20.02.2019	Copy of letter of sanction of credit facilityissued by theBank.	Annexure-A1
2.	18.12.2015	Copy of initial agreement of cash/ credit/overdraft/demand loan between the applicants and the defendant bank.	Annexure-A2
3.	01.08.2019	Copy of letter issued by the defendant bank.	Annexure-A3
4.	07.02.2018	Copy of Section 13(2) Notice issued by defendants.	Annexure-A4
5.	12.02.2019	Copy of possession notice issued by the defendants.	Annexure-A5
6.	20.09.2022	Copy of inspection notice issued by Advocate Commissioner in CMP No.432/2021 before the Chief Judicial Magistrate CourtManjeri.	Annexure-A6
7.	13.10.2022	Copy of injunction application filed by 1^stapplicant in O.A.80/2022 before DRT-II,Ernakulam.	Annexure-A7
8.	15.09.2020	Copy of judgment in W.P. (C) No. 31645/2019 n the files of Hon'ble High Court of Kerala.	Annexure-A8
9.	28.10.2020	Copy of judgment in W.A,1403/2020 on thefiles of Hon'bleHighCourt of Kerala	Annexure-A9

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List of documents filed by the Defendants along with the Reply Statement

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SL. No.	Date	Particulars
1.	---	Copy of Valuation Report in respect of land having an extent of 42.25 cents along with the residential building situate therein in Sy. No.457/3 of Arakkuparamba village, Perinthalmanna Taluk, Malappuram and also an extent of 3 Cents of land in Sy. No.457/3 of Arakkuparamba village, Perinthalmanna Taluk, Malappuram district, Kerala State within the registration Sub District of Melattur.	Annexure-B1

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Page 8 of 9

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SA No.557 of 2022

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2.	---	Copy of Valuation Report in respect of land having an extent of 2 cents in Sy. No.200/12 of Thazhekode village, Perinthalmana Taluk, Malappuram district, Kerala State within the registration of Sub District of Perinthalmanna together with commercial building No.XV/756 of Thazhekode Grama Panchayat.	Annexure-B2
3.	----	Copy of Valuation Report in respect of land having an extent of 38.25 cents of land in Sy. No.456 of Arakkuparamba village, Perinthalmanna Taluk, Malappuram Dist, Kerala State pertaining to jenmam assignment deed No.4073/2002 dt. 09.12.2002 of SRO Melattur.	Annexure-B3
4.	---	Copy of the statement of account in respect of the ODCC A/c No.16605500002827as on 16.01.2023.	Annexure-B4

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(Su. WILLYAHM) PRESIDING OFFICER

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Mj/

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Page 9 of 9

Mohammed Ali M K v. Federal Bank

Case brief

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Mohammed Ali M K v. Federal Bank

Case brief

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