Securitisation applicants contested possession and sale notices for a defaulted mortgage loan. The Tribunal dismissed the application, holding the applicants failed to invalidate the bank's enforcement steps or prove procedural infirmity in the notices.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
Fair Order
IN THE DEBTS RECOVERY TRIBUNAL - 1 AT ERNAKULAM
DATED THIS 12th DAY OF APRIL, 2023
PRESENT: Su. WILLYAHM, B.Sc., M.L. [DISTRICT JUDGE - Retd] PRESIDING OFFICER
S.A No.69 of 2023
Between
---Applicants
And
State Bank of India, ARMB M.G. Road, Ernakulam -682011 Rep by Chief Manager.
---Defendant
This Securitisation Application coming on 16.03.2023 for final hearing before me in the presence of Mr.George Simon, Advocate for Applicants and Mr. K.K. John, 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:
O R D E R
SA No.69 of 2023
The 1st applicant is the principal borrower of the SUVIDHA loan and the 2nd applicant, who is the wife, is the surety to the loan. The applicant availed from the defendant bank a mortgage loan of Rs.45,00,000/- (Rupees Forty Five Lakhs only) in the year 2015.
The applicants already paid approximately more than Rs.45,00,000/- towards the Suvidha loan and only a meager amount has to be paid towards the same as per the statement of records, Annexure-A2 taken from the State Bank of India, Pattambi branch. The defendant bank sent possession notice, Annexure-A3 on 13.12.2021. E-auction sale notice, Annexure-A4 was also issued for sale of immovable assets.
Applicants paid an exorbitant interest rate which itself raged over 36% including monthly rest, penalty etc. which is against the Banking policy (BCLR rates). The applicant No.1 approached the bank with a request, Annexure-A5 to settle the account out of court and to avoid penal interest, excessive interest on loan amount in the account No.67338157270 and to provide an actual due statement. The valuation obtained by the bank is totally illegal and unsustainable.
The property put for sale is worth more than INR 2,00,00,000/(Rupees Two Crores only) and the applicant is willing to regularize the loan within three months as on today. The interest calculated also is very huge. The declaration of the loan as NPA is also not as per the guidelines of Reserve Bank of India. The applicant and the respondent bank have orally agreed to settle the case. Accordingly the petitioner has paid an amount of Rs.46,83,245.85.
As per assessment of the approved Valuer, the scheduled property in the sale notice is worth Rs.89,00,000/-, Rs.43,75,286.18 going by defendant’s version. There are two items of properties in the schedule. The claim of the defendant can be satisfied by sale of only one of the properties. Sale of all the properties is not required. There is a total illegality in putting the entire property which is valued much higher than the amount due to the bank.
As per the order of the Hon’ble CJM Court on the file of MC..71/2023, Advocate Commissioner was appointed to hand over the physical possession of the secured asset. The notice issued by Advocate Commissioner Sri.Kailas Raj dated 02.03.2023 is produced as Annexure-A6. This Hon’ble Tribunal may stay the entire proceedings initiated by the Bank as per Section 14 of the SARFAESI Act, 2002 before Hon’ble CJM Court, Palakkad on the file of M.C.
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SA No.69 of 2023
No.71/2023 and direct the respondent bank to regularize the loan by accepting the defaulted amount of arrears until now into an equal EMI and also direct the respondent bank to permit the applicant to pay the EMI in the future.
The Securitisation Application is not maintainable in law or on facts. The applicant is not entitled to any of the reliefs claimed. The 1st applicant availed of a Suvidha Term Loan of Rs.45,00,000/- against mortgage of immovable property – 9.71 Ares of land and building situated in Sy.No.52/7 (old 37/6 C part) in Pattambi village, belonging to the 1st applicant, from the erstwhile State Bank of Travancore, Pattambi Branch on 30.09.2015. The 2nd applicant guaranteed the transaction. The State Bank of Travancore was amalgamated with the defendant bank with effect from 01.04.2017.
As the applicants committed default in repayment of the amounts due under the aforesaid loan the defendant bank filed O.A. No.316/2022 before this Tribunal for recovery of an amount of Rs.36,31,218.70 due as on 05.04.2022 and the same is pending.
As the applicants failed to repay the amount in terms of the agreement and the account having been classified as Non Performing Assets on 31.12.2020 in accordance with the directives/guidelines of the Reserve Bank of India, the defendant bank had issued AnnexureA1 notice under Section 13(2) of the SARFAESI Act to both the applicants demanding repayment of an amount of Rs.38,26,794/together with further interest and incidental expenses, costs, charges etc. on 15.07.2021. Copies of the postal acknowledgments for having accepted Annexure-A1 notice by applicants 1 and 2 dated 24.07.2021 are produced as Annexure-B1 and B1(a).
Since the applicants failed to comply with the demand and no objection/representation was submitted by the applicants to the notice issued under Section 13(2) of the Act, the authorised officer of the defendant took symbolic possession of the secured assets by delivering Annexure-A3 possession notice to the applicants. The possession notice was duly affixed on conspicuous place of the property on 14.12.2021 as provided under Rule 8(1) of the Security Interest (Enforcement) Rules 2002. Copy of the photographs taken at the time of affixture of the possession notice dated 14.12.2021 is produced as Annexure-B2. The possession notice was published in The Hindu (English) and Deshabhimani (Malayalam) two leading
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SA No.69 of 2023
newspapers having sufficient circulation in that locality as provided under Rule 8(2) of the Security Interest (Enforcement) Rules 2002 on 18.12.2021. Copies of the publication in The Hindu (English) and Deshabhimani (Malayalam) newspapers dated 18.12.2021 are produced as Annexures B2(a) and B2(b).
The Authorised officer obtained valuation report, Annexure-B3 of the property from approved valuer and fixed the reserve price in consultation with the secured creditor, who approved the reserve price at Rs.89,00,000/- for property.
The defendant then issued Annexure-A4 sale notice to the applicant on 29.12.2022 for sale of the secured assets to be held on 15.02.2023. Copies of the postal acknowledgments for having accepted Annexure-A4 sale notice by applicants 1 and 2 are produced as Annexure-B4 and B4(a). Annexure-A4 sale notice was affixed on the secured assets on 07.01.2023. The photograph of affixture effected on 07.01.2023 is produced as Annexure-B4(b).
The sale notice was published in the leading newspapers – The Hindu (English) and Mathrubhumi (vernacular) having sufficient circulation in the locality where the secured asset is situated on 08.01.2023. Copies of the publications in The Hindu (English) and Mathrubhumi (vernacular) dated 08.01.2023 are produced as Annexure-B4(c) and B4(d). The undisputed statement of accounts Annexure-A2, produced by the applicants would show an amount of Rs.35,66,615.70 as due to the defendant under the Suvidha Loan Account No.67338157270 as on that date wherein interest is applied upto 05.02.2023 only. Under the Income Recognition and Assets Classification Norms of Reserve Bank of India, the account on being treated as a Non-Performing Asset; further interest is not applied in the ledger. The applicant is however entitled to recover the unapplied interest till the date of payment also as per the agreement.
The averment in para 3 of the S.A that the applicants had already paid an exorbitant interest rate which itself is raged over 36% etc. is not correct and hence denied. The interest charged in the account is fair, reasonable and in accordance with Reserve Bank of India guidelines issued under Sec.21 of the Banking Regulation Act 1949. The defendant has charged only the contracted rate of interest. The interest rate history in the account is produced as Annexure-B5.
The representation allegedly submitted by the 1st applicant dated 26.08.2021, the copy of which is produced by the applicants
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SA No.69 of 2023
and marked as Annexure-A5 in the S.A. was not received by any of the officers to whom the same was addressed.
The valuation of the property was not Rs.89,00,000/- at the time of availing the loan in 2015. It was Rs.92,90,000/-. But that has no relevance in the SARFAESI Act proceedings. The secured asset is not worth more than Rs.20,00,000/- as alleged.
The averment in para 8 of the S.A. that the applicant and defendant bank orally agreed to settle the case and the applicant paid an amount of Rs.46,83,245.85 is denied being false.
The averment in para 9 of the S.A. that there are two items of properties in the schedule is not correct and hence denied. There is only one item of secured property namely – 9.71 Ares of land in Re Sy. No.52/7 (old Sy No.37/6C) in Ongallur -2/Pattambi Pallipram village with a residential building. The property could not be conveniently divided so that one part would fetch the outstanding amount due in the account and the other part could be put to beneficial use. The present valuation of the secured asset was obtained by the authorised officer as stipulated under Rule 8(5) of the Security Interest (Enforcement) Rules, 2002.
As it was difficult to get a purchaser while the borrower is occupying the premises, taking physical possession of the secured asset was expedient. Hence the defendant approached the Chief Judicial Magistrate Court Palakkad and obtained order for assistance under Section 14 of the Act. The Commissioner appointed by the Chief Judicial Magistrate Court issued Annexure-A6 notice. But no challenge is made by the applicant against the proceedings initiated by the defendant under Section 14 of the SARFAESI Act, or the order passed by the learned Chief Judicial Magistrate or the notice Annexure-A6 issued by the Advocate Commissioner. The S.A. is without any merit or bonafides and is liable to be dismissed with costs to the defendant.
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SA No.69 of 2023
been repaying the outstanding loan due. But they have averred in the S.A. that only a meagre amount had been paid. However, it is seen from the perusal of the written statement of the defendants Bank that since the applicants committed default in repayment of the outstanding loan due, their loan account was classified as NonPerforming Asset on 31,12,2020 and that demand notice dated 15.07.2921, Annexure-a1 was issued to the applicants calling upon them to pay outstanding loan due within a period of 60 days from the date of receipt of the notice. The defendant bank has filed AnnexureB1 and B1(a) postal acknowledgement cards to show that the demand notice was served to the applicants. It cannot be disputed that the applicants neither sent any objection/representation to the demand notice nor did they clear their liability of the outstanding loan due. Hence the defendant Bank issued possession notice, Annexure-A3 for taking symbolic possession of the secured asset. A perusal of Annexure-B2, B2(a) and B2(b) shows that the possession notice was affixed on the conspicuous place of the secured asset on 14.12.2021 and that it was also published in The Hindu (English) edition and Deshabimani (Malayalam) edition, which are two leading newspapers having sufficient circulation in that locality. The defendant Bank issued Annexure-A4 sale notice dated 29.12.2022 to the applicants. The defendant Bank has produced Annexure-B4 and B4(a) to prove its averment that sale notice was served to the applicants. It is seen from the perusal of Annexure-B4(b) that sale notice was affixed on the conspicuous place of the secured asset on 07.01.2023. A perusal of Annexure-B4(c) and (d) shows that he sale notice was published on 08.01.2023 in two leading newspapers, The Hindu (English) and Mathrubhumi (vernacular) edition having sufficient circulation in the locality where the secured asset is situated.
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SA No.69 of 2023
applicants cannot be accepted as correct. The applicants have averred in the S.A that the worth of the secured asset is more than Rs.2 Crores. A perusal of valuation report, Annexure-B3 shows that the value of the secured asset has been fixed at Rs.99,39,900/- by the approved Valuer of the defendant Bank after having considered the various aspects with regard to the location and nature of the secured asset. In any event, the applicants have not produced any records to prove their contention that the value of the secured asset is more than Rs.2 Crores.
The applicant has miserably failed to prove his case that Annexure-A4 sale notice and the order in M.C. No.71/2023 of the Chief Judicial Magistrate Court Palakkad suffers from any infirmity or procedural irregularity.
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SA No.69 of 2023
In view of the foregoing reasons, this Tribunal holds that the applicant is not entitled to get the reliefs sought for in this SA. In the result, S.A No. 69 of 2023 stands dismissed. No costs.
Dictated to Steno, taken down, transcribed, typed by him, corrected and pronounced by me in the open court on this the 12th April, 2023.
(Su. WILLYAHM)
PRESIDING OFFICER
Mj/
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SA No.69 of 2023
List of documents filed by the Applicants along with the application
| S.No. | Date | Particulars |
|---|---|---|
| 1. | 15.07.2021 | True copy of the notice under Sec.13(2) OF SARFAESI Act, 2002issued toapplicantNo.1 |
| 2. | 10.10.2022 | True copy of mortgage loan (SUVIDHA) A/c No.8590816109 statementfrom30.09.2015 to10.10.22 |
| 3. | 13.12.2021 | Possession notice |
| 4. | 29.12.2022 | Salenoticeissued by defendantBank. |
| 5. | 26.08.2021 | True copy of request for settlement issued by Applicant No.1. |
| 6. | 02.03.2023 | True copy of the notice issued by Advocate Commissioner. |
List of documents filed by the Defendant Bank along with the Written Statement
| S.No. | Date | Particulars |
|---|---|---|
| 1. | 24.07.2021 | Postalacknowledgement signed by1st applicant. |
| 2. | 24.07.2021 | Postal acknowledgement signed by 2nd applicant |
| 3. | 14.12.2021 | Photographofaffixture ofpossession notice effected. |
| 4. | 18.12.2021 | Publication of possession notice in The Hindu (English) daily. |
| 5. | 18.12.2021 | Publication of possession notice in Deshabhimani (vernacular) daily. |
| 6. | 12.11.2022 | Valuation report submitted by the approved valuer Mr.JosephGeorge |
| 7. | 05.01.2023 | Postalacknowledgment signed by1st applicant. |
| 8. | 31.12.2022 | Postalacknowledgment signed by 2nd applicant. |
| 9. | --- | Photographof affixture ofsalenotice effected. |
| 10. | 08.01.2023 | Publicationofsalenoticein TheHindu (English) daily. |
| 11. | 08.01.2023 | Publication of sale notice in Mathrubhumi (vernacular) daily. |
(Su. WILLYAHM) PRESIDING OFFICER
Mj/
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2 issues framed by the court
Whether the applicants are entitled to relief in their Securitisation Application challenging the bank's enforcement proceedings.
Whether the procedural steps taken by the bank including issuance of demand, possession, and sale notices were valid.
3 provisions across 2 enactments
Manikandan K.
Salja Manikandan
State Bank of India
Su. WILLYAHM
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
