Dismissed

P Ashraf v. Shriram Housing Finance Limited

DRT27 Apr 2023SA/584/2022

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal dismissed a Securitization Application challenging SARFAESI Act notices. The Tribunal held that the Defendant was a valid secured creditor and that the applicants lacked clean hands by suppressing facts regarding loan disbursements.

What did the court decide?

The Securitization Application No. 584 of 2022 is dismissed with costs to the Defendant.

P Ashraf versus Shriram Housing Finance Limited — Contract and Commercial Disputes | DRT (2023)

¶1

Fair Order

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IN THE DEBTS RECOVERY TRIBUNAL - 1 AT ERNAKULAM

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DATED THIS 27^th DAY OF APRIL, 2023

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

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S.A No.584 of 2022

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Between

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P. Ashraf, B No.13/228, Sy No.519/2-8, Pallarimangalam village, Muvattupuzha, Ernakulam – 686661.

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Shakkela Ashraf, B No.13/228, Sy No.519/2-8, Pallarimangalam village, Muvattupuzha, Ernakulam – 686661.

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---Applicants

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And

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Shriram Housing Finance Limited, Represented by its Authorized Officer, Level 3, Wockhardt Towers, East Wing, C-2, G Block, Bandra E, Mumbai – 400 051.

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---Defendant

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This Securitisation Application coming on 17.03.2023 for final hearing before me in the presence of Mr. Georgie Johny, Advocate for Applicants and Mr. Sabu S. Kallaramoola, Advocate for Defendant and upon hearing the arguments of Counsels for both the parties and having stood over for consideration till this day, this Tribunal delivered the following:

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SA No.584 of 2022

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O R D E R

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This Securitisation Application was filed on 13.12.2012 seeking to call for the records leading to Annexure-A2 notice issued by the Advocate Commissioner purporting to be in pursuance of the proceedings initiated by the Bank under the SARFAESI Act, and set aside the same and to call for the records leading to Annexure-A1 possession notice issued by the Defendant in pursuance of the proceedings initiated under the SARFAESI Act, and set aside the same and to declare that the proceedings under the SARFAESI Act, initiated by the Defendant including the notice under Section 13(2) against the subject matter property is bad in law and all proceeding pursuant thereto is illegal and liable to be set aside and to direct the Defendant to pay the costs of this application.

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

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The defendant through its Authorized Officer issued a notice dated 22.08.2022, Annexure-A1 to the applicants purporting to be under Section 13(4) of the SARFAESI Act. It is stated in Annexure-A1 that the applicants had availed certain loan from the defendant and that the said loans have been classified as Non-Performing Asset in accordance with the directives and guidelines of the National Housing Bank.

¶19

The applicants have not availed any housing loan from the defendant and that all that is stated in Annexure-A1 notice is false. The applicants had never availed any financial assistance in the form of a housing loan for construction and/or purchase of dwelling units from defendant. There is no valid mortgage and legally enforceable debt in favour of the defendant.

¶20

The defendant has not issued a notice as contemplated under SARFAESI Act. The applicants received a notice dated 24.11.2022, Annexure-A2 issued by the Advocate Commissioner appointed by the Hon’ble Chief Judicial Magistrate Ernakulam vide Order dated 02.11.2022 in M.C. No.911 of 2022 intimating the applicants that the Advocate Commissioner will be visiting the premises on any day after 13.12.2022 to take physical possession of the subject matter property so as to hand over the same to the defendant.

¶21

In the year 2017, the 2^nd applicant had availed certain financial facilities from the defendant. The amount was disbursed by the defendant to the Bank account of “SAS Rubberised Coir Products” and that the “SAS Rubberised Coir Products” has been promptly repaying the amounts. The disbursement of the loan amount by the defendant

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SA No.584 of 2022

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and the repayment to the defendant is evidenced from the books of accounts of “SAS Rubberised Coir Products”, Annexure-A3. True copy of the Statement of accounts of the Bank account of “SAS Rubberised Coir Products” maintained with Federal Bank for the period 01.05.2017 to 30.06.2017 is produced and marked as Annexure-A4.

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The Defendant is a housing finance company registered under Sub-Section (5) of Section 29A of National Housing Bank Act, 1987. Therefore, any notice issued by the defendant under the SARFAESI Act for recovery of any money other than financial assistance for the construction and/or purchase of dwelling units is illegal.

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This S.A. is being filed as the applicant has no other remedy except to invoke the jurisdiction of this Hon’ble Tribunal under Section 17 of the Securitization Act.

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

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The above Securitization Application is filed suppressing material facts and for the sole reason it has to be dismissed in limini. The respondent company is a “Financial Institution’ defined under Section 2 Sub Section 1(m) of the Securitization Act. The respondent is a ‘Secured Creditor’ within the meaning of Section 2(1)(zd) of The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. True copy of Gazette notification dated 18.12.2015 is produced herewith and marked as Annexure-B1. Defendant is also registered with the Registrar of Companies as a ‘non-banking finance company’ under the Companies Act. True copy of certificate of incorporation dated 19.11.2010 issued by the Deputy Registrar of Companies is produced herewith and marked as Annexure-B2.

¶29

The applicants approached this defendant to take over a housing loan they availed from M/s Sundaram Finance Limited and also for top up the loan after taking over. Upon their request the defendant took over the loan of the applicants, availed from M/s.Sundaram Finance Limited, by sanctioning an amount of Rs.16,57,254/- and disbursed the same to the loan account of applicants maintained with M/s Sundaram Finance Limited. After closing the said loan, all documents pertaining to the secured asset herein were brought and deposited with the defendant by the applicants and availed Rs.47,76,909/- as loan against property by executing a separate agreement. After the execution of agreements and disbursed of the loan amounts, the defendants registered the

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SA No.584 of 2022

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deposit of title deed with the central registry, as contemplated under Section 22 of the SARFAESI Act.

¶33

The loan account of the applicants were classified as NPA on 05.06.2022 and thereafter on 13.06.2022 demand notice, AnnexureB3 under Section 13(2) of the Act has been issued to them by registered post. Though the applicants accepted the notice, they neither paid the amount mentioned therein nor replied under Section 13 (3A) of the Act. Hence after the expiry of the statutory period of 60 days, Annexure-1 notice was issued. True copy of postal receipts and acknowledgement cards signed by applicants are produced herewith and marked as Annexure-B4 and B5 respectively.

¶34

The contention of the applicants that the respondent is having license only to lend money for housing purpose only, is incorrect and misleading. The respondent is notified as a “Financial Institution” defined under Section 2 Sub Section 1(m) of the Securitization Act for the purpose of invoking the provisions of the Act, for recovering various loans given to its customers. For the purpose of lending money as housing loan it is mandatory to get registration with the National Housing Bank. True copy of certificate of registration dated 04.08.2011 issued by the National Housing Bank is produced and marked as Annexure-B6.

¶35

That the total outstanding liability as on 08.12.2022 from the applicants under Loan Account No.SBTHCOCH0000265 is Rs.18,01,829/and Loan Account No.STUHCOCH0000266 is Rs.53,00,076/- together with interest therein. True copy of statement of account along with foreclosure statement in respect of loan No.SBTHCOCH0000265 and SBTHCOCH0000266 are produced herewith and marked as Annexure-B7 and B8 respectively.

¶36

The defendant approached the CJM Court, Ernakulam and filed application u/s.14 of the SARFAESI Act, supported by all the statutorily required documents. After satisfaction, the Hon’ble CJM Court appointed the Advocate Commissioner and he issued Annexure2 notice. It is prayed that this Hon’ble Tribunal may kindly dismiss the S.A filed by the applicants with costs to this defendant.

¶37

The defendant filed additional Written Statement dated 08.02.2023 contending as follows :

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True copy of loan agreement dated 29.03.2017 bearing No.STUHCOCH0000265 is produced herewith and marked as Annexure-B9. True copy of the loan agreement dated 29.03.2017 bearing No.STUHCOCH0000266 is produced and marked as

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SA No.584 of 2022

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Annexure-B10. True copy of the CERSAI report downloaded dated 30.08.2022 is produced and marked as Annexure-B11.

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The regulatory frame work of the Housing Finance Companies issued by the Reserve Bank of India also permitted the defendant to lend money for non-housing loans. True copy of review of regulatory framework of Housing Finance Companies dated 22.10.2020 issued by Reserve Bank of India is produced and marked as Annexure-B12. In the official website also the defendant had disclosed in public domain regarding various products which the defendant is permitted to do business. True downloaded copy of official website of the defendant is produced and marked as Annexure-B13. In the above circumstances the S.A. filed by the applicants may be dismissed with costs to this defendant.

¶43

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

¶44

Point: The counsel appearing for the applicants submitted that the defendant issued notice dated 22.08.2022, Annexure-A1 to the applicants stating that they had availed certain loan from the defendant and that the loan had been classified as Non Performing Asset and that the applicants did not avail any housing loan for construction or purchase of dwelling unit from the defendant and that no valid mortgage has been created by them in favour of the defendant and that in the year 2017 the 2^nd applicant had availed certain financial facilities in the account of SAS Rubberised Coir Products as per Annexure-A3 and Annexure-A4, from the defendant and that the defendant is a Housing Finance Company registered under Section 29A (5) of National Housing Bank Act, 1987 and that the license issued to Housing Finance Company including the defendant is for the limited purpose of carrying on business of advancing loans for the construction and/or purchase of dwelling unit and that notice issued by the defendant under the SARFAESI Act, 2002 for recovery of money other than financial assistance for the construction and/or purchase of dwelling unit is illegal and that therefore Annexure-A2 notice issued by the Advocate Commissioner on the basis of the order passed by the Hon’ble Chief Judicial Magistrate Court, Ernakulam on a petition filed by the defendant under Section 14 of the SARFAESI Act, 2002 is against the statutory mandates and that therefore the SA may be allowed as prayed for.

¶45

The counsel appearing for the defendant submitted that the defendant is a financial institution as defined under Section 2(1)(m) of the SARFAESI Act, 2002 and that the defendant is a secured creditor within the meaning of Section 2(1) (zd) of the SARFAESI Act, 2002, as

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Page 5 of 10

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SA No.584 of 2022

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per Annexure-B1 and that the defendant company has been registered with the Registrar of the Companies as a Non Banking Finance Company as per Annexure-B2 certificate of incorporation and that the applicants availed from this defendant a take-over housing loan which they had availed from M/s. Sundaram Finance Ltd and also a top up loan and that after disbursal of loan, the loan accounts of the applicants maintained with M/s Sundaram Finance Ltd were transferred and deposited with the defendant and that after execution of agreements, the defendant registered the deposit of title deed with the Central Registry and that since the loan accounts of the applicants was classified as NPA on 5.6.2022, demand notice, dated 13.6.2022, Annexure-B3 was issued to them and that they did not send reply or pay the loan due and that the defendant company has been registered with the National Housing Bank as per Annexure-B6 certificate and that on application filed under Section 14 of the SARFAESI Act, 2002 before the Ld. Chief Judicial Magistrate Court, Ernakulam. Order was passed appointing Advocate Commissioner for taking physical possession of the secured asset and that as per Annexure-B12 the Reserve Bank of India has permitted the defendant to lend money for non housing loans and that the defendant has disclosed in public domain with regard to his permit to do business as per Annexure-B13 and that therefore the SA is liable to be dismissed with cost.

¶49

The applicants have totally denied availment of housing loan from the defendant. They have also denied the creation of mortgage in favour of the defendant for availment of any loan. However, they have averred in the SA that the 2^nd applicant had availed certain financial facilities from the defendant. They have produced true copies of Books of Accounts of SAS Rubberised Coir Products for the period 1.4.2015 to 1.4.2022 and another true copy of statement of accounts of SAS Rubberised Coir Products for the period 1.5.2017 to 30.6.2017 as Annexure-A3 and A4. A perusal of Annexure-B9, copy of loan agreement dated 29.3.2017 bearing No.STUHCOCH0000265 and Annexure-B10, copy of loan agreement dated 29.3.2017 bearing No.STUHCOCH0000266 strengthens the contention of the defendant that Annexure-B9 and B10 were executed by the applicants in favour of the defendant for taking over a home loan availed from M/s.Sundaram PNP Paribas Home Finance as per Annexure-B14 and another loan against property (non housing). Annexure-B7 and B8 which are true copies of statement of accounts reveals the fact that the total outstanding liability as on 8.12.2022 from the applicants under the loan account No.STUHCOCH0000265 is Rs.18,01,829/and loan account No.STUHCOCH0000266 is Rs.53,00,076/- together with interest therein.

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Page 6 of 10

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SA No.584 of 2022

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Annexure-B14 is a true copy of disbursement request form submitted by the applicants on 29.03.2017 and Annexure-B15 is true copy of disbursement request submitted by the applicants on 29.03.2017, to the defendant. In Annexure-B14 the applicants had requested to sanction loan of Rs.19,84,660/- by way of cheque favouring SAS Rubberised Coir Products. In Annexure-B15 the applicants had requested the defendant to sanction loan of Rs.20,39,413/- by way of cheque favouring Sundaram BNP Paribas Home Finance Ltd. The applicants having availed the aforesaid loans upon execution of Annexure-B9, B10, B14 and B15 loan agreements have suppressed the above facts and contended that they had not availed any loan from the defendant. Thus it is evident that the applicants have not approached this Tribunal with clean hands.

¶53

According to the defendant since the loan account of the applicants were classified as NPA on 05.06.2022, demand notice dated 13.6.2022, Annexure-B3 was issued to them calling upon them to repay the outstanding loan due within a period of 60 days from the date of issue of notice. The applicants cannot deny the receipt of demand notice, on account of production of postal acknowledgment cards signed by the applicants as Annexure-B4 and B5 respectively. It is seen from the averment of the written statement of the defendant that the applicants neither sent any reply/objection to the demand notice nor did they pay the amount mentioned in the demand notice to the defendant. Hence the defendant was constrained to submit application under Section 14 of the SARFAESI Act, 2002 before the Ld. Chief Judicial Magistrate Court, Ernakulam. Order was passed in M.C. No.911/2022 by the learned Chief Judicial Magistrate Court, Ernakulam for taking physical possession of the secured asset. Pursuant to the above order, the Advocate Commissioner issued notice Annexure-A2 dated 24.11.2022 to the applicants informing them that he would take physical possession of the secured asset. Hence the applicants have filed this S.A.

¶54

The main and foremost contention by the applicants in the SA is that since the defendant is a Housing Finance Company and license has been issued for the limited purpose of carrying on business of advancing loans for the construction and/or purchase of dwelling unit, notice issued by the defendant under the SARFAESI Act, 2002 for recovery of money other than financial assistance is liable to be quashed. Another contention raised by the applicants is that the defendant is not a secured creditor as defined under Section 2(1)(m)(iv) of the SARFAESI Act, 2002, he is not empowered to initiate any measures including issuance of demand notice. The above

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SA No.584 of 2022

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contentions of the applicants have been countered by the defendant in their written statement and additional written statement.

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Annexure-B1 is the gazette notification dated 18.12.2015 issued by the Ministry of Finance wherein the defendant has been notified as “Financial Institution” defined under Section 2(1)(m) of the SARFAESI Act, 2002. A perusal of Annexure-B12 and B13 shows that the regulatory frame work of the financial housing companies issued by the Reserve Bank of India has permitted the defendant to lend money for non housing loans and that the defendant has also disclosed in public domain through official website regarding various projects which the defendant had permitted to do business. The defendant has produced Annexure-B11 to show that the defendant company has been registered with CERSAI. Therefore, it is established that the defendant company is a financial institution defined under Section 2(1)(m) of the SARFAESI Act, 2002 and that the defendant is a secured creditor within the meaning of Section 2(1)(zd) of the SARFAESI Act, 2002. Therefore, the contention of the applicants that the defendant company is not a financial institution and that the defendant is not a secured creditor and that therefore the demand notice dated 13.6.2022, issued by the defendant and further measures initiated such as issuance of Annexure-A2 notice pursuant to the demand notice are liable to be set aside, is absolutely devoid of merits and that therefore the same is liable to be rejected in toto.

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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, S.A No. 584 of 2022 stands dismissed with costs to the defendant.

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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 27^th April, 2023.

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(Su. WILLYAHM) PRESIDING OFFICER

Mj/

Page 8 of 10

SA No.584 of 2022

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

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S.No.	Date	Particulars
1.	22.08.2022	True copy of the notice issued by the Defendant purporting to be under Section 13(4) of the SARFAESI Act.
2.	24.11.2022	True copy of the notice issued by the Advocate Commissioner.
3.	---	True copy of the books of accounts of “SAS Rubberised Coir Products” for the period of 1^stApril 2015 to 1^st April2022.
4.	---	True copy of the Statement of accounts of the bank account of “SAS Rubberised Coir Products” maintained with Federal Bank for the period 01.05.2017 to 30.06.2017.

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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
1.	18.12.2015	True copy ofGazattenotification
2.	19.11.2010	True copy of certificate of incorporation issued by the DeputyRegistrarofCompanies
3.	13.06.2022	True copy ofdemandnotice
4.	13.06.2022	True copy ofpostal receipts
5.	---	True copy of acknowledgement cards signed by applicants
6.	04.08.2011	True copy of certificate of registration issued by the National housingBank.
7.	23.12.2022	True copy of Statement of account in respect of loan No.SBTCHCOCH0000265
8.	23.12.2022	True copy of Statement of account in respect of loan No.SBTCHCOCH0000266
9.	29.03.2017	True copy of the loan agreement bearing No.SBTCHCOCH0000265.
10.	29.03.2017	True copy of the loan agreement bearing No.SBTCHCOCH0000266.
11.	30.08.2022	True copy ofthe CERSAI report downloaded.
12.	22.10.2022	True copy of the Review of regulatory framework of Housing Finance Companies issued by Reserve Bank of Indiaregarding.
13.	---	True downloaded copy ofofficial website ofdefendant.

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Page 9 of 10

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SA No.584 of 2022

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14.	29.03.2017	True copy of Disbursement Request Form executed by theapplicants.
15.	29.03.2017	True copy of Disbursement Request Form executed by the applicants requesting to disburse loan account favouring M/s Sundaram BNP Paribas Home Finance Ltd.

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(Su. WILLYAHM) PRESIDING OFFICER

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Mj/

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Page 10 of 10

P Ashraf v. Shriram Housing Finance Limited

Case brief

What is this about?

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P Ashraf v. Shriram Housing Finance Limited

Case brief

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