Allowed

Majeeda Banu v. South Indian Bank

DRT29 Apr 2024SA/108/2023

Case brief

AI extract

What is this about?

The Tribunal allowed the applicant's application to set aside securitization measures initiated by the bank. It held that failure to serve demand and possession notices to all legal heirs of the deceased guarantor, including the applicant, vitiated the proceedings, and ordered the restoration of possession.

What did the court decide?

Set aside securitization proceedings; direct respondents to restore possession to legal heirs; credit expenses to loan account.

Majeeda Banu versus South Indian Bank — Banking and Recovery | DRT (2024)

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IN THE DEBTS RECOVERY TRIBUNAL-2, KERALA AT ERNAKULAM

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PRESENT: SRI.SOVAN KUMAR DASH PRESIDING OFFICER

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Dated this the 29^th day of April, 2024

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SECURITIZATION APPLICATION No.108/2023

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Between

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Majeeda Banu, Hameeda Manzil, Benglamkunnu, Karukachal, Kottayam – 686 540. …Applicant

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And

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South Indian Bank Ltd., Represented by its Branch Manager, 2^nd Floor, TMJ Complex, Ramanchira, Thiruvalla, Kottayam – 689 107.

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The Authorised Officer, South Indian Bank, Thiruvalla – 689 107.

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Nagoor Meeran Shahul, S/o.Shahul Hameed, Nisha Manzil, Banglamkunnu, Karukachal, Kottayam – 686 540. …Defendants

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This Securitization Application having been heard on 22.04.2024

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in the presence of Advocates M/s.V.K.Peer Mohamed Khan and Girish Kumar V.C. for the applicants and Advocate Sri.C.Ajith Kumar for the 1^st and 2^nd defendants and the 3^rd defendant being absent, and stood over to this day for consideration, the Tribunal delivered the following:

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F I N A L O R D E R

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This SA is filed under S.17(1) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security

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SA 108/2023

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Interest Act, 2002 (hereinafter referred to as ‘the SARFAESI Act’) by the applicant, W/o.Mr.Kather Oli, who is the guarantor to the credit facilities availed by the 3^rd defendant, praying to set aside the demand notice, possession notice and other securitization measures initiated by the defendant bank.

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Brief facts of the case :

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In the SA it is pleaded that husband of the applicant viz., Mr.Kather Oli stood as guarantor for a business loan of Rs.75 lakhs, ECLGS loan of Rs.10 lakhs and home loan of Rs.15 lakhs availed by the 3^rd defendant Mr.Nagoor Meeran, proprietor of M/s.Hameetha Stores, Karukachal. Due to default in repayment, the loans were classified as NPA. The defendant bank issued demand notice dated 04.11.2022 under S.13(2) of the SARFAESI Act but the same was not duly served on the applicant and other legal heirs of late Kather Oli. It is averred in the application that the guarantor Kather Oli died on 16.10.2021 at his native village in the State of Tamil Nadu, which is apparent from the death certificate marked Annexure-A1. As per the Mohammedan Law of Inheritance, after death of Kather Oli, the applicant and her two daughters viz., K.Asifa and K.Hameeda and also his siblings derived interest over the property left by him.

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Without issuing a demand notice to all the legal heirs of the deceased Kather Oli, the defendant bank took illegal possession of the subject matter property on 25.01.2023 under S.13(4) of the SARFAESI Act for the default committed by the borrower. The possession notice was also not affixed on the secured asset as per the statutory requirements which also vitiates the securitization proceedings. It is also contended that after death of the husband of

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SA 108/2023

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the applicant, the 3^rd defendant availed ECLGS facility and enhanced his business loan without the knowledge and concurrence of the legal heirs of the deceased guarantor. Hence item No.2 property owned by late Kather Oli cannot be held liable for the loans availed by the 3^rd defendant. As the demand notice was not served on all the legal heirs of the deceased guarantor, entire proceeding is vitiated and the defendant bank cannot proceed with the same. Hence the SA may be allowed by setting aside the entire securitization proceedings initiated by the 1^st and 2^nd defendants.

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The 1^st and 2^nd defendants filed written statement denying the averments in the application and claimed inter alia that the 3^rd defendant availed housing loan facility with a limit of Rs.18.40 lakhs, cash credit open loan of Rs.15 lakhs which was renewed from time to time and enhanced upto Rs.70 lakhs and ECLGS limit of Rs.14.12 lakhs from the defendant bank. The husband of the applicant S.Kather Oli stood as guarantor for the loans availed by the 3^rd defendant and executed guarantee agreement besides creating equitable mortgage in respect of the property described in the written statement. Due to the default committed by the 3^rd defendant, the loans were classified as NPA on 28.08.2022. After the death of S.Kather Oli, the 1^st defendant issued recall notice and guarantee invocation letter to his legal heirs marked Annexures-B1 and B2 respectively.

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As the liabilities remain unpaid, securitization proceedings were initiated and demand notice under S.13(2) of the SARFAESI Act was issued to the applicant and other legal heirs of the guarantor but the notice was returned served. Consequently, demand notice was published in Deepika and Business Line dailies dated 24.11.2022. As

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SA 108/2023

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there was no response to the demand notice, the 2^nd defendant took symbolic possession of the secured asset on 25.01.2023 and the possession notice was published in Deepika and The Hindu dailies dated 29.01.2023. All the relevant documents are produced in this case. There is no violation of any of the provisions of the SARFAESI Act and the Rules made thereunder. Huge amount is outstanding in the loan accounts. The SA is filed by the applicant by raising untenable contentions and hence the same may be dismissed with costs.

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The 3^rd defendant is a pro-forma party to this proceeding, for which the applicant issued summons and notice by registered post, but he did not appear in this case.

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From the respective case of the applicant and 1^st and 2^nd defendants, the following points are emerged for adjudication in this case:

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(i) Whether the securitization proceedings initiated by the defendant bank suffer from any illegality, irregularity, or defect?

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(ii) Whether the applicant is entitled to get any relief in this case?

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FINDINGS:

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Point Nos.(i) & (ii):

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For the sake of convenience, both the points being interlinked with each other are taken up together for adjudication. There is no dispute that husband of the applicant S.Kather Oli stood as guarantor for the loan facilities availed by the 3^rd defendant from the defendant bank. The applicant claims that her husband expired prior

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SA 108/2023

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to issuance of demand notice by the defendant bank. On perusal of the death certificate marked Annexure-A1, it is seen that S.Kather Oli died on 16.10.2021. Annexure-A1 is not challenged by the 1^st and 2^nd defendants and the date of death of the guarantor is also not disputed. It is specifically stated in the notice issued by the Advocate of the defendant bank to the applicant marked Annexure-A4 that as the guarantor S.Kather Oli died leaving behind his legal heirs 3 to 6 among you, recall notice and guarantee invocation letter was issued to them for the loans availed by the 3^rd defendant. It is apparent from this notice that Hameedha is one of the daughters of S.Kather Oli but the demand notice marked Annexure-B3 indicates that no notice was issued to her. So also in the possession notice issued by the defendant bank marked Annexure-A2 and the paper publications marked Annexures-B8 and B9, daughter of S.Kather Oli Ms.Hameedha is not included. No explanation is furnished by the defendant bank in their written statement about non-issuance of demand notice and possession notice to one of the legal heirs of the deceased S.Kather Oli when they admitted that Hameedha is the daughter of S.Kather Oli.

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The question arises whether non-issuance of demand notice to one of the legal heirs of the deceased guarantor vitiates the entire securitization proceedings? Admittedly, after the death of S.Kather Oli, his daughter Hameedha derived interest over a portion of the secured asset as per the Mohammedan Law of Inheritance which is not disputed. In the absence of service of demand notice on the daughter of deceased guarantor S.Kather Oli, who derived interest over the secured asset, the entire securitization proceedings is

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SA 108/2023

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vitiated. Based upon such illegal demand notice, defendant Nos.1 and 2 cannot proceed with the securitization measure.

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Besides such material defect, it is seen from the records and averments in the SA that after return of the demand notice issued to the applicant and other legal heirs of the deceased guarantor as unserved, the defendant bank has taken steps for publication of the notice in two newspapers in Deepika and Business Line dailies marked Annexures-B6 and B7. But there is no whisper in the written statement about affixture of 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 or carries on business or personally works for gain.

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R.3 of the Security Interest (Enforcement) Rules, 2002 reads as follows:-

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3. Demand Notice .— ( 1) The service of demand notice as referred to in sub-section (2) of section 13 of the Act shall be made by delivering (including hand delivery) or transmitting at the place where the borrower or his agent, empowered to accept the notice or documents on behalf of the borrower, actually and voluntarily resides or carries on business or personally works for gain, by registered post with acknowledgement due, addressed to the borrower or his agent empowered to accept the service or by Speed Post or by courier or by any other means of transmission of documents like fax message or electronic mail service:

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Provided that where authorised officer has reason to believe that the borrower or his agent is avoiding the service of the notice or that for any other reason, the service cannot be made as aforesaid, the service shall be 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 or carries on business or personally works for gain and also by publishing the contents of the demand notice in two leading newspapers, one in vernacular language, having sufficient circulation in that locality.

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As per this Rule, where the Authorised Officer has reason to believe that the borrower or his agent is avoiding the service of notice or that for any other reason the service cannot be made, service shall be

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SA 108/2023

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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 or carries on business or personally works for gain and also by publishing the contents of the demand notice in two leading newspapers, one in vernacular language having sufficient circulation in that locality. When the statute prescribes for service of demand notice by way of affixture and publication, mere compliance of publication does not comply with the statutory requirements. Hence the service of demand notice made by the defendant bank on the applicant and other legal heirs cannot be held as valid service.

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In view of the discussion made above, as the demand notice and possession notice were not issued to one of the legal heirs of the deceased guarantor S.Kather Oli, the 1^st and 2^nd defendants cannot proceed further with the securitization measures in view of non-compliance of the statutory requirements. Hence both the points framed in this case are answered in favour of the applicant. Since possession of the secured asset was taken by the defendant bank in such illegal proceedings, the 1^st and 2^nd defendants are directed to restore possession of the secured asset to the legal heirs of the deceased guarantor forthwith. The defendant bank shall also give proper credits of the expenses debited towards issuance of demand notice and possession notice and also publication of the said notices in newspapers into the loan account.

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SA 108/2023

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Hence it is ordered:-

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ORDER

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In view of the foregoing reasons, this SA is allowed on contest. The securitization proceedings initiated by the 1^st and 2^nd defendants are hereby set aside, giving liberty to them to proceed afresh from the stage of issuance of demand notice in accordance with the law.

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(Dictated to my PA, corrected and pronounced by me in the open Tribunal on this the 29^th day of April, 2024)

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[SOVAN KUMAR DASH] PRESIDING OFFICER

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SA 108/2023

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Documents on the part of the applicant

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Annexures Date Particulars of documents

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Annexure-A1	30.10.2021	Copy of death certificate.
Annexure-A2	25.01.2023	Copy of possession notice issued by the defendant bank.
Annexure-A3	06.09.2022	Copy of guarantee invocation letter issued by the defendant bank.
Annexure-A4	14.02.2023	Copy of notice issued by the Advocate of the defendant bank.

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Documents on the part of defendants 1 and 2

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Annexure-B1	06.09.2022	Copy of recall notice issued by the defendant bank.
Annexure-B2	06.09.2022	Copy of guarantee invocation letter issued by the defendant bank.
Annexure-B3	04.11.2022	Copy of demand notice under S.13(2) of the SARFAESI Act issued by the defendant bank.
Annexure-B4	05.11.2022	Copy of postal receipts evidencing despatch of Annexure-B3 notice.
Annexure-B5 series	…	Copy of returned postal covers addressed to the applicant and others.
Annexure-B6	24.11.2022	Copy of publication of demand notice in Deepika daily.
Annexure-B7	24.11.2022	Copy of publication of demand notice in Business Line daily.
Annexure-B8	29.01.2023	Copy of publication of possession notice in Deepika daily.
Annexure-B9	29.01.2023	Copy of publication of possession notice in The Hindu daily.

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PRESIDING OFFICER

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IN THE DEBTS RECOVERY TRIBUNAL-2, KERALA AT ERNAKULAM

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PRESENT: SRI.SOVAN KUMAR DASH PRESIDING OFFICER

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Dated the 29^th April, 2024

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SA No.108/2023

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Between

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Majeeda Banu, Hameeda Manzil, Benglamkunnu, Karukachal, Kottayam.

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…Applicant

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And

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South Indian Bank Ltd., Represented by its Branch Manager, 2^nd Floor, TMJ Complex, Ramanchira, Thiruvalla, Kottayam – 689 107 & 2 others. …Defendants

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F I N A L O R D E R

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SA No.108/2023 29.04.2024

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……………….. In view of the foregoing reasons, this SA is allowed on contest (vide separate final order) . The securitization proceedings initiated by the 1^st and 2^nd defendants is hereby set aside, giving liberty to them to proceed afresh from the stage of issuance of demand notice in accordance with the law.

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Presiding Officer

Majeeda Banu v. South Indian Bank

Case brief

What is this about?

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Majeeda Banu v. South Indian Bank

Case brief

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