Dismissed

R Mogana v. the Chief Judicial Magistrate

DRT6 Jun 2024SA/2/2024

Case brief

AI extract

What is this about?

In this SARFAESI appeal, the Debts Recovery Tribunal dismissed an application challenging an order by the Chief Judicial Magistrate authorizing the appointment of an Advocate Commissioner to take possession of mortgaged property. The court found the bank followed SARFAESI procedures correctly and noted the sale had already occurred.

What did the court decide?

The SARFAESI Appeal No.2/2024 stands dismissed with no costs, and all pending interim applications are disposed of.

R Mogana versus the Chief Judicial Magistrate — Execution and Attachment | DRT (2024)

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SA No.2/2024

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Fair Order

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IN THE DEBTS RECOVERY TRIBUNAL AT MADURAI

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DATED THIS 06^th DAY OF JUNE, 2024

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PRESENT: SEEMA SINHA

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[PR. DISTRICT & SESSIONS JUDGE - Retd]

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PRESIDING OFFICER

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SA No.2/2024

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R. Mogana, W/o. Ramesh, No. 835-C, Anbu Nagar, Koothandan (Post), Melavaniyakudi, Sivagangai – 630 561. --- Applicant -Vs-

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The Chief Judicial Magistrate, Sivagangai

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The Branch Manager, Piramal Capital & Housing Finance Ltd., (formerly Dewan Housing Finance Ltd (DHFL) No.12, O.C.P.M. School Road, 1^st Floor, IOB Upstairs, Kamarajar 2^nd Street, Chinnachokkikulam, Madurai. --- Defendants

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B. Jayaprakash,

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S/o. Balagurusamy, No. 11/26D, 4^th Street, Bose road, Sivagangai - 630 561. --- Proposed Defendant/Third Party

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Appearance of Advocates: Mr. A. Shajahan ---- Counsel for the Applicant Mr. P. Pethu Rajesh ---- Counsel for the 2^nd Defendant FI Mr. N. Sudalai Muthu ---- Counsel for the 3^rd Defendant/Auction Purchaser

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Page 1 of 14

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SA No.2/2024

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This SARFAESI Application was heard in the presence of Counsels for the Applicant and 2^nd Defendant FI and the 3^rd Defendant/Auction Purchaser and fixed for passing final order before me and upon hearing the arguments of the Counsels and having stood over for consideration till this day, this Tribunal delivered the following:

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O R D E R

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1 . This application has been filed under Sec.17(1) of the SARFAESI Act 2002 by the Applicants praying that this Hon'ble Tribunal may be pleased to quash the order passed by the 1^st Defendant in Crl.M.P.No. 10997/2023 dated 13.12.2023 as arbitrary and illegal and void and pass such other orders as this Hon'ble Tribunal may deem fit and proper in the circumstances of the case and thus render justice.

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2 . The brief averments of the Application filed by the Applicant are as follows:-

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The Applicant submitted that her husband namely Ramesh has availed a housing loan from the Defendant which is a Housing Finance Company. In fact the Borrowers have availed such loan from the then Dewan Housing Finance Corporation Ltd, which was subsequently, taken over by Piramal Capital & Housing Finance Ltd., which is arrayed as Defendant in this appeal. In the said loan transaction, the Applicant herein stood as a co-borrower being the wife of Ramesh.

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It is further submitted that the said Housing Finance Company even though originally sanctioned a sum of Rs. 17,18,339/- as a loan, and got the deposit of title deeds by way of mortgage executed by Ramesh and the Applicant herein on 25.01.2018. But, the Housing Finance Company has released only a sum of Rs. 7,00,000/- (Rupees Seven Lakhs only) as against the sanctioned loan of Rs. 17,18,339/- (Rupees Seventeen Lakhs Eighteen Thousand Three Hundred and Thirty Nine only) more fully due to heavy loss of business in Dewan Housing Finance Corporation Ltd and subsequently, taken over by the 2^nd Defendant herein. Initially, the Applicant was regular in repayment and already cleared more than Rs. 3,10,700/- (Rupees Three

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Page 2 of 14

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SA No.2/2024

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Lakhs Ten Thousand seven Hundred only). While so, there was sudden outbreak of the COVID-19 Pandemic and due to declaration of lock out and closing of all the business and industrial establishments and government offices, the Applicant could not generate any funds for payment of the monthly installments in time.

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It is further stated that in such circumstances even without serving any notice as per the guidelines prescribed by the Reserve Bank of India as well as the SARFAESI Act, the Defendant Finance Company has declared the loan account of the Applicant as a Non Performing Asset and thus closed the loan account. The Applicant further stated that the Defendant Finance Company has issued a Demand Notice dated 21.03.2022 to the Applicant demanding to pay huge amount of Rs. 7.00 Lakhs immediately within a period of 60 days. It is further submitted that immediately after receipt of such Demand Notice, the Applicant personally approached the Respondent Bank and explained the sudden financial crisis being faced by her and requested to give breathing time to pay the installments. But, the Defendant Finance Company without giving any reasonable opportunity, in a mechanical manner has issued the Possession Notice dated 13.10.2022 U/s.13(4) of SARFAESI Act.

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On receipt of such notice as stated above, the Applicant being a bonafide person with an intention to clear the loan, has sent a legal notice through his counsel on 21.12.2022, wherein it was clearly stated that she has already paid a total sum of Rs. 4,43,360/- as against the principal loan amount of Rs. 7.00 Lakhs sanctioned by the Defendant Bank and also assured to settle the balance amount within a short period of time more fully by way of One Time Settlement. Since, there was no reply to such legal notice issued by the Applicant, the Applicant personally also approached the Defendant Bank and explained her serious financial crisis and requested for some time and thereafter she sent a legal notice to the Defendant Finance Company stating that she is prepared to settle the balance by way of One Time Settlement on 16.10.2023.

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It is further submitted that in spite of such legal notice, the Defendant Finance Company kept silence and all of a sudden approached the Chief

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Page 3 of 14

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SA No.2/2024

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Judicial Magistrate Court, at Sivagangai and filed a Petition in Crl.M.P.No.10997/2023 u/s.14(1) & (2) of the SARFAESI Act,2002 and obtained an order dated 13.12.2023, whereby appointed Smt. L. Bhuvaneswari, Advocate as an Advocate Commissioner for taking possession of the secured assets as mentioned in the schedule of property of the said petition and to hand over the same to the Secured Creditor/Defendant Finance Company with assistance of concerned Village Administrative Officer with police protection.

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Therefore, it is submitted that the impugned order passed by the Ld. Chief Judicial Magistrate, Sivagangai is highly illegal and arbitrary. Hence, the Applicant is constrained to challenge the impugned order for the following among other

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Main Grounds:-

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That the impugned order appointing the Advocate Commissioner for

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Taking Physical Possession of the secured assets by the Defendant Finance Company has been obtained by playing fraud and the bank has not placed the proper facts before the court and thus the said order was obtained and hence, the same is liable to be set aside.

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That the declaration of the account of the Applicant as Non Performing Asset (NPA) could not be justified and the Defendant Finance Company ought to have followed the RBI guidelines in this regard before declaring the Applicant debts as NPA.

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After the loan account has been classified as NPA, the Defendant Finance Company is not entitled to claim any interest for non payment of the loan accounts as per the guidelines issued by the Reserve Bank of India.

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The Applicant has been diligently paying the installment amounts to the Defendant Finance Company in respect of the housing loan availed by the Applicant without fail.

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That the Demand Notice has been issued by exaggerating the loan amount more fully by calculating huge rate of interest than the one agreed upon at the time of availing the housing loan.

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Page 4 of 14

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SA No.2/2024

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In spite of repeated demands made by the Applicant, copy of the balance of account of the loan account of the Applicants has not been furnished with oblique motives.

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The Defendant Finance Company obtained the orders from the Court Through the Advocate Commissioner for taking Physical Possession of the property in a most mechanical and illegal manner. No notice was served by the Advocate Commissioner before taking possession of the Applicant's property. The Impugned Possession Notice has been affixed on the property of the Applicant and not personally served on them.

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That the measures have been taken under section 13(4) of SARFAESI Act are not in accordance with the NPA Act. Hence, the Hon'ble Tribunal may be pleased to set aside the Possession Notice.

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The Defendant Finance Company without considering the request of the appellant for One Time Settlement of the loan amount, has in a most callous and mechanical manner issued the impugned Possession Notice which is liable to be set aside.

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Due to the sudden outbreak of the COVID-19 Pandemic, there is no

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income at all to the Appellant. Even Reserve Bank of India and the Government of India have time and again directed the banks not to take any coercive steps against the defaults of any loans. On this ground alone the impugned order of the learned court is liable to be quashed.

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As a bonafide citizen, the Applicant has hypothecated the huge property and mortgage deed was also duly registered. She has paid the installments regularly, but due to unfortunate and unforeseen circumstances, she has not been able to settle the loan amount. All her efforts to have a One Time Settlement, by proper negotiations and waiving the interest on the basis of the guidelines issued by the Government due to the said pandemic, have not yielded any results.

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Therefore, it is prayed that this Hon'ble Tribunal may be pleased to allow this Application.

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Page 5 of 14

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SA No.2/2024

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SCHEDULE OF PROPERTY

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All that piece and parcel of the property situated at Sivagangai Registration District, in no. 2 Joint Registration Office, Sivagangai paiyur utkadai, Pillyar vayal Village S.No. 112/13 and S.No. 112/14 measuring total extent of 156.88 Square meter equal to 1688 Square feet in which plot no. 40 and Patta no. 4480.

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Four Boundaries:

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North : 20" feet wide East West public pathway South : Plot No. 33 West : Plot No. 39 East : Plot No. 41

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The Applicant has submitted the following List of documents in support of their claim in the SA, which are as follows:

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S.No.	Date	Particulars
1.		SARFAESI Appeal
2.		Possession Notice
3.	21.12.2022	Legal Notice sent to Defendant
4.	16.10.2023	Legal Notice sent to Defendant
5.		Petition filed u/s. 14(1) SARFAESI Act
6.	13.12.2023	Order in Crl.MP.No.10997 of 2023
7.		Vakalat

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3 . On the other hand, the 2^nd Defendant FI appeared on notice and filed his Written Statement in which he has submitted that the 2^nd Defendant Financial Institution is a Housing Finance Company, registered with Reserve Bank of India under National Housing Bank Act. At the outset, the 2^nd Defendant Finance Company deny all the allegations leveled the Application and Grounds as false except those which are specifically admitted herein. Originally, the loan was obtained from Dewan Housing Finance Corporation

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Page 6 of 14

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SA No.2/2024

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Ltd. Because of the Financial constrain meet, the said company is forced to face liquidation proceedings and the Defendant succeeded the said company.

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It is further submitted that the Applicant's husband M. Ramesh availed credit facility from the Dewan Housing Finance Corporation Ltd to the tune of Rs. 7,66,283/- by mortgaging the Schedule mentioned property for the purpose of constructing a house vide Application dated 19.11.2017. The Applicant herein is the Co-borrower to the said credit facility. In this regard, a Loan Agreement was executed on 20.01.2018. The Schedule mentioned property was mortgaged through a Registered Mortgage Deed dated 25.01.2018. Originally, the amount sanctioned was Rs. 18,20,886/Out of it, Rs. 7,66,283/- was disbursed. Since, the borrower failed to pay the interest for the said amount, balance amount was not disbursed.

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After availing the above said credit facility, the Applicant and the CoApplicant remained chronic defaulter in repaying the said facility availed with accrued interest, despite several reminders. Since, the Applicant failed to clear the outstanding dues despite receipt of several communications, the accounts has been classified as NPA on 09.02.2022. Consequently, a Demand Notice dated 21.03.2022 for a sum of Rs. 7,90,293/- as on 09.02.2022 was issued u/s.13(2) of the SARFAESI Act to the Applicant and her husband on 06.12.2019 and the same was returned. A Paper Publication was effected in this regard on 23.04.2022 in Tamil at Dinamani and in English at Indian Express daily News Papers. Admittedly, the Applicant and her husband had not given any reply to the 13(2) Demand Notice and failed to repay the outstanding loan amount.

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It is further submitted that following the Demand Notice, Possession Notice U/s. 13(4) of the SARFAESI Act read with Rule 8 was issued on 13.10.2022 to the Applicant and her husband and the same was served to them on 31.10.2022. The said notice was pasted in the mortgaged premise

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Page 7 of 14

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SA No.2/2024

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on 13.10.2022 itself and published in Tamil through 'Makkal Kural' and in English through Trinity Mirror daily Newspaper on 16.10.2022.

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It is further submitted that despite the issuance of the Possession Notice, the Applicant and her husband caused hindrance in taking Physical Possession of the property. Because of the hindrance given by the Applicant and her husband, the 2^nd Defendant Financial Institution filed proceedings u/s. 14 of the SARFAESI Act, before the Ld. CJM, Sivagangai in Crl.MP.No. 10997 of 2023 and the same was allowed on 13.12.2023 by appointing an Advocate Commissioner to take the Physical Possession of the property. Before getting the said order, the property was subjected to e-auction sale and one Mr. B. Jeyaprakash participated in the e-auction was declared as successful bidder and a sale confirmation letter was issued in this regard on 29.08.2023. Further, the order passed by the Ld. CJM is not adjudicatory in nature and the same is in strict compliance of section 14 of the SARFAESI Act.

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Hence, it is therefore prayed that this Hon'ble Tribunal may be pleased to DISMISS the above Application with exemplary cost and thus render justice.

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Typed set of Paper filed by the Defendant Bank on 10.01.2024

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S.No.	Date	Particulars
1.	21.03.2022	Demand Notice u/s. 13(2) of the SARFAESI Act with Postal Tracking
2.	23.04.2022	Paper Publication for Demand Notice
3.	13.10.2022	Possession Notice with acknowledgment Card
4.	13.10.2022	Photograph showing affixture of the Possession Notice
5.	16.10.2022	Paper Publication in Makkal Kural Tamil Daily and TrinityMirror English Daily
6.	29.08.2023	Sale Confirmation Letter

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Page 8 of 14

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SA No.2/2024

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4. During adjudication, the counsel for the 2^nd Defendant Financial Institution, informed before this Tribunal that the property has already been sold to the Auction Purchaser.

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Hence, the Applicant was directed to implead the Auction Purchaser as one of the party in this case. Accordingly, the Auction Purchaser was impleaded as a 3^rd Defendant and on issuance of notice, the Counsel for the 3^rd Defendant has appeared and filed his Reply Statement. The details are as follows:

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The 3^rd Defendant had participated in the e-auction conducted by the 2^nd Defendant and declared as a successful bidder and sale confirmation letter was also issued on 29.08.2023. As per the schedule, the 3^rd Defendant had paid the sale consideration within the due date.

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It is further submitted that as per the order passed by the 1^st Defendant, the Ld. Advocate Commissioner had handed over the Physical Possession of the Schedule mentioned property to the 3^rd Defendant on 18.01.2024. The Sale Certificate has also been issued on 18.01.2024. Now, the 3^rd Defendant is absolute owner of the Schedule mentioned property and Registration is pending due to the proceedings pending before this Hon'ble Tribunal.

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It is further submitted that the Applicant borrower had not even challenged the e-auction sale dated 18.08.2023. In the absence of any specific challenge as to the E-Auction sale dated 18.08.2023, challenging the consequent order dated 13.12.2023, passed by the 1^st Defendant, the present SARFAESI Appeal is not at all maintainable and on this ground alone, the SARFAESI Appeal has to be dismissed in limine with cost.

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It is further submitted that the 3^rd Defendant have participated in the e-auction dated 18.08.2023 and declared as a successful bidder as per the provisions of SARFAESI Act. Based on that the 3^rd Defendant had also paid

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Page 9 of 14

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SA No.2/2024

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the sale consideration with great difficulties by mobilizing money from known sources for exorbitant interest. Hence, the interest of the 3^rd Defendant cannot be disregarded in view of the latest amendment of section 13(8) of the Act which had clearly changed the position to the effect that now, the moment an auction is publicly notices, and the right to redemption of a borrower under the Act gets extinguished.

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Furthermore, the term 'right to redemption' essentially means that a mortgagor shall be entitled to ask for the transfer of its security back to itself or to a person it names if it is able to tender the entirety of the mortgage dues to the mortgagee prior to a transfer of such security. The fact remains that the Applicant borrower had not made any payment till today whereas, the entire sale consideration has been paid as on 29.08.2023 itself by the 3^rd Defendant and sale confirmation letter, Sale Certificate and Physical Possession has also been handed over to the 3^rd Defendant.

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In such a circumstances, without questioning/challenging/objecting any of the measures (Possession Notice, Sale Notice & E-auction sale) taken by the 2nd Defendant FI under the provisions of SARFAESI Act, 2002, stalling the e-auction sale happened as early as on 18.08.2023, by simply filing SA, challenging the order dated 13.12.2023 passed by the 1^st Defendant is highly illegal and on this ground alone, the present SARFAESI Appeal has to be dismissed.

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It is further submitted that the right of redemption of the mortgagor stands extinguished upon publication of auction notice as per amended section 13(8) of the SARFAESI Act. Furthermore, once the sale is confirmed and the Bank had issued a Sale Certificate and handed over the Physical Possession, then nothing survives in the claim of the Applicant in challenging the order dated 13.12.2023 passed by the 1^st Defendant. Further, once an Auction Purchase is confirmed under Rule 9(2) of the Rules of 2002, the successful bidder acquires a vested right to secure a Sale Certificate and, consequently, the property. The 3^rd Defendant herein has a

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Page 10 of 14

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SA No.2/2024

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legitimate and protected interest in the property acquired through the auction. And, the 3^rd Defendant has an absolute right over the Schedule mentioned property which cannot be altered or curtailed in any manner.

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In this case, the 3^rd Defendant had participated in the e-auction conducted by the 2^nd Defendant and declared as a successful bidder and sale confirmation letter was also issued on 29.08.2023. As per the schedule, the 3^rd Defendant had paid the sale consideration within the due date. Now the 3^rd Defendant is absolute owner of the Schedule mentioned property and hence, nothing survives in the claim of the Applicant in challenging the order dated 13.12.2023 passed by the 1^st Defendant.

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Therefore, it is prayed that this Hon'ble Tribunal may be pleased to dismiss the SA with cost and thus render justice.

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Type set filed by the 3^rd Defendant

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S. No.	Date	Description
1	29.08.2023	Sale Confirmation Letter
2	18.01.2024	Panchanama handing over the Possession
		to the 3^rdDefendant
3	18.01.2024	Sale Certificate issued by the 2^nd Defendant

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4. ON THE BASIS OF ABOVE PLEADINGS THE POINT WHICH ARISES FOR CONSIDERATION IS:-

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I. Whether the Applicant has been able to prove his case in his favour?

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II. Whether the Applicant is entitled to get the reliefs as prayed for?

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5 . Having heard the parties and after going through the entire documents available on the records, this Tribunal find that there is no dispute with regard to the availment of loan facilities by creating equitable mortgage on his property. Since, the Applicant failed to repay the loan amount that made the loan account as NPA. It is the contention of the counsel for the Defendant Bank that the Applicant after availing the above said loan facilities, failed to re-pay the outstanding loan dues regularly. The

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Page 11 of 14

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SA No.2/2024

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Applicants stated in the SA that due to the lockdown announced by the Government due to COVID-19 Pandemic period, the Applicants could not generate funds and that there is no wilful default in repayment of the outstanding loan dues. I also find that thereafter the Defendant Bank classified the loan account as NPA on 09.02.2022 and issued a Demand Notice U/s 13(2) dated 21.03.2022. Thereafter, the bank has also issued a Possession Notice dated 13.10.2022. Later on, the Defendant Bank had approached the Ld. CJM, Sivagangai District and obtained an order dated 13.12.2023, for appointing an Advocate Commissioner for taking Physical Possession of the schedule mentioned property.

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6 . In this case, the Applicant has challenged only the order of Ld. Chief Judicial Magistrate, Sivagangai, seeking relief to set aside the order of the Ld. CJM on the ground that the Demand Notice and Possession Notice issued by the bank are not proper as the bank has failed to follow the procedure as mentioned in the SARFAESI Act.

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I perused the Demand Notice and I find that the bank has issued the Demand Notice on 21.03.22, which was received by the Applicant as it appears from perusal of acknowledgement card and tracking report (page nos. 1 to 12 of typeset of Bank). The contention of the Applicant is that the bank has issued Demand Notice during the COVID-19 Pandemic period, but he has not filed any document to substantiate his averment, he has also not replied to the Demand Notice as required under section 13(3A) of the SARFAESI Act. Therefore, I do not find any force in the contention of the Applicant that the classification of his loan account as NPA is in contravention of the rules and guidelines issued by the RBI. It does not hold good.

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I also perused the Possession Notice, which is available at page no. 15-18 of Bank's Typeset, and I find that this Possession Notice was issued on 13.10.2022, which was received by the Applicant on 03.11.2022, which is evident from perusal of acknowledgement card at page no. 17 of the

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Page 12 of 14

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SA No.2/2024

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typeset of papers filed by the bank. The counsel for the bank has also submitted that the Possession Notice was also published in two Newspapers on 16.10.2022, one is in English and another one is in Tamil. So, I find that Possession Notice was also published in two newspapers within 7 days from the date of issuance of Possession Notice, which is evident from perusal of Paper Publication of Possession Notice available at page no. 20-21 and photo showing affixture of Possession Notice is available at page no. 19. So, I find that bank has not violated any rules of SARFAESI Act in issuance of Possession Notice.

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I also find that during the pendency of the case, the bank has informed this Court that property was sold and hence, on the direction of this Tribunal, the Applicant has impleaded the Auction Purchaser. The Auction Purchaser appeared and filed his Reply Statement alongwith the typeset of papers. In this case, I also find that though the bank has stated that property was sold, but he has not filed Sale Notice and related documents, but only sale confirmation letter has been filed by the bank. The Applicant has also not filed any document and he has not even challenged the Sale Notice and Sale held.

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Further, the Applicant has though filed the impleading Petition, but there is no prayer to set aside the Sale. However, this sale cannot be decided in this case, in the absence of any substantial piece of evidence. But, so far the Demand Notice and Possession Notice are concerned, I find that the bank has followed the procedure as mentioned in the SARFAESI Act and rules. He has also filed the documents in support of his averments.

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From perusal of order of Ld. CJM filed by the Applicant, which is at page no. 29 to 34 and the petition filed before the Ld. CJM is also available at page no. 22 to 28, I find that neither the bank has mentioned anywhere in petition that sale was held nor it is mentioned in the Ld. CJM order that sale was held.

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Page 13 of 14

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SA No.2/2024

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Under these circumstances and in view of the above discussions, I find that the Applicant has failed to prove his case. Accordingly, the order passed by the Ld. Chief Judicial Magistrate is in accordance with law.

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In the result, the SA No.2/2024 stands dismissed with no costs. Consequently, all pending IAs are also disposed of.

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Dictated to PA (DK), taken down, transcribed, typed by her, corrected and pronounced by me in the Open Court in this the 06^th June, 2024.

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sd/-

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(SEEMA SINHA) PRESIDING OFFICER

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Dictated & Corrected by me

sd/-

(SEEMA SINHA)

PRESIDING OFFICER

Typed by me

(D. Krishnaveni, PA)

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Page 14 of 14

R Mogana v. the Chief Judicial Magistrate

Case brief

What is this about?

What did the court decide?

R Mogana v. the Chief Judicial Magistrate

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

Coram

Case details

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