Allowed

Naseema Jaleel v. Federal Bank

DRT8 Oct 2024SA/24/2023

Case brief

AI extract

What is this about?

The Tribunal allowed the Securitization Application, setting aside a demand notice, possession notice, and an order passed by the Additional Chief Judicial Magistrate. The court held that measures under the SARFAESI Act initiated before full CERSAI registration of the mortgaged property were illegal and invalid, permitting the bank to initiate proceedings afresh.

What did the court decide?

Demand notice dated 02.07.2022, possession notice dated 19.11.2022, and order dated 06.04.2024 set aside; Applicant entitled to reliefs.

Naseema Jaleel versus Federal Bank — Banking and Recovery | DRT (2024)

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Fair Order

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IN THE DEBTS RECOVERY TRIBUNAL - 1 AT ERNAKULAM

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DATED THIS 08^th DAY OF OCTOBER, 2024

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

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S.A No. 24 of 2023

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Between

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Naseema Jaleel, W/o. Jaleel Anchan Paruthickal, Anchamparuthickal House, Thanipadam, Mannam P.O, North Paravur, Ernakulam – 683 520.

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--- Applicant

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And

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The Federal Bank Limited, Loan Collection & Recovery Division, Ernakulam, Federal Towers, Marine Drive, Ernakulam, Kerala-682 031.

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Branch Manager, Federal Bank, North Paravur Branch, P.B. No.9, Chendamangalam Junction, North Paravur, Ernakulam – 683 513.

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--- Defendants

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This Securitization Application coming on 10.07.2024 for final hearing before me in the presence of Mr. Deepak K. Joy, Advocate for the Applicant and Mr. Jojo George, Advocate for the defendants and upon hearing arguments of learned Counsels for both the parties and

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SA No.24 of 2023

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upon perusing the material on records, this Tribunal delivered the following:

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O R D E R

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This Securitisation Application was filed on 30.12.2022 seeking to declare that the notice under Section 13(2) and Section 13(4) of the SARFAESI Act, 2002 and Annexure-A7 order passed by the learned Additional Chief Judicial Magistrate (for MLA's and MP's) Ernakulam in MC No.1086/2023 and Annexure-A8 notice issued by the Advocate Commissioner are illegal and are liable to be set aside.

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The availment of term loan to the limit of Rs.83,00,000/- from the 2^nd defendant bank by the applicant and her husband Mr. Jaleel Anchan Paruthickal upon creation of equitable mortgage in respect of the land admeasuring 36.42 Ares situated in Sy. Nos.356/8-2-2, 356/10-2-2 and 356/11/2-3 covered by Sale Deed No.4236/1993 dated 27.08.1993 of SRO, North Paravur by deposit of title deeds in favour of the 2^nd defendant bank is admitted by the applicant in the SA.

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The applicant has not averred in the SA as to whether she made repayment towards the outstanding loan due without default. However, it is revealed from the perusal of the written statement of the defendants that since on account of irregular repayments, the loan account of the applicant came to be classified as NPA. Hence demand notice dated 02.07.2022 Annexure-B1 was issued to the applicant and the co-borrower calling upon them to repay the outstanding loan due within a period of 60 days from the date of receipt of the demand notice.. The defendants have produced Annexure-B2, copy of postal receipt and B3 copy of proof of delivery in order to show that demand notice was served on the applicant and the co-borrower. Indisputably, the applicant and co-borrower neither sent any objection/ representation to the demand notice nor did they clear off their liability due to the defendant bank.

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Therefore, the defendants issued possession notice dated 19.11.2022, Annexure-A4 for symbolically taking possession of the secured asset. The defendants have produced Annexure-B5 copy of proof of delivery in order to show that possession notice was served on the applicant and the co-borrower. The defendants have also produced copies of paper publications Annexure-B6 and B7 and copy of photograph Annexure-B8 in order to prove their contention that possession notice was published in two leading newspapers, one in

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SA No.24 of 2023

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‘The New Indian Express’ daily dated 23.11.2022 and another one in ‘Mangalam’ daily edition dated 23.11.2022 and that possession notice was conspicuously affixed on the secured asset.

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Subsequently, the defendant filed application Annexure-A5 and affidavit Annexure-A6 under Section 14(1) of the SARFAESI Act, 2002 before the Additional Chief Judicial Magistrate (MPs/MLAs) Ernakulam. Order dated 06.04.2024 Annexure-A7 came to be passed appointing Advocate Commissioner for taking physical possession of the secured asset. The Advocate Commissioner issued Annexure-A8 notice dated 29.04.2024 to the applicant and the co-borrower informing them that he would take physical possession of the secured asset on 18.05.2024.

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The counsel appearing for the applicant submitted that there is a two storied residential building in the mortgaged property and that the same has not been registered with the CERSAI and that hence building cannot be taken physical possession and that the learned Additional Chief Judicial Magistrate (MPs/MLAs) Ernakulam passed order without taking into consideration of the CERSAI certificate in respect of extent of the property shown therein and that in AnnexureA9 copy of ID Based search report shows that the property having an extent of 15.36 Ares in Sy. No.356/11-2-3 along with residential building has been omitted to be registered with CERSAI and that the above said omitted Sy. No. and extent along with building is shown in the schedule of the property to the application Annexure-A5 and that Asset ID No. and the security interest ID No. shown in Annexure-B9 copy of ID Based search report filed by the defendants is different and that the registration of the property having an extent of 15.36 Ares in Sy. No.356/11-2-3 along with residential building is only an afterthought and that as per the provisions of Section 26 D of the SARFAESI Act, 2002 , SARFAESI measures shall not be initiated without registration of the mortgaged property with CERSAI and that therefore issuance of Demand Notice and possession notice and proceedings under Section 14 of the SARFAESI Act, 2002 are liable to be set aside and that the Hon’ble Gauhati High Court has held in Goverdhan Prasad Atal Vs. Assam Gramin Vikash Bank & others [2021 KHC 2202] since the total value of the land and the building is Rs.3,21,47,000/-, only 1/3^rd of the total extent of the property excluding the building is required to clear off the debts due to the bank and that therefore the entire property need not be taken possession for sale and that the affidavit Annexure-A6 does not fulfil the 9 requirements as contemplated under the proviso to Section 14

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SA No.24 of 2023

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(1) of the SARFAESI Act, 2002 and that Annexure-A6 affidavit is not affirmed by the Authorised Officer and that the Additional Chief Judicial Magistrate (MPs/MLAs) Ernakulam without looking into the details pertaining to CERSAI registration, identity of the property and non-compliance of the requirement under Section 14 (1) of the SARFAESI Act, 2002 passed order to take physical possession of the secured asset and that therefore the SA may be allowed as prayed for.

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Per contra , the Counsel appearing for the defendants submitted that the deposit of title deed was made by the applicant and her husband with intention to create security for the availment of credit facility and that the 2^nd defendant bank has created registration vide ID No.200024334044 in the CERSAI portal with respect to 87 cents (36.42 Ares) of immovable asset which includes the residential building on 10.10.2018 and that Section 26 D of the SARFAESI Act, 2002 envisages that no secured creditor shall be entitled to exercise the right of enforcement of securities under Chapter III unless the security interest created in its favour by the borrower has been registered with Central Registry and that Section 26 B of the SARFAESI Act, 2002 for registration of the security interest by the secured creditors was inserted in the Act on 16.08.2018 and that the said provisions of the Act came into effect on 24.01.2020 and that it does not have retrospective effect and that it is not correct to state that the 2^nd defendant bank has not registered the security assets in the CERSAI portal and that the omission to show a small portion of whole extent of 36.42 Ares in Annexure-A9 Security interest ID Based search report does not attract the restrictive impediment in Section 26 D of the SARFAESI Act, 2002 and that the aforesaid legal issue has been settled in Punjab National Bank Vs. Assistant Commissioner of State Tax (D-815) & others by the Hon’ble High Court of Judicature at Bombay and that since the Chief Judicial Magistrate exercises quasi-judicial functions, his application of mind is not required while passing order under Section 14 of the SARFAESI Act, 2002 and that the above issue has been settled by the Hon’ble Supreme Court in Balakrishna Rama Tarle Dead Thr LRs and another Vs. Phoenix ARC Private Limited and others [2022 KHC 7020] .

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In Annexure-B1 Demand Notice the description of the mortgaged immovable properties is mentioned as “ All that piece and parcel of land having a total extent of 36.42 Ares with residential building and all improvements thereon consisting of (a) 11.96

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SA No.24 of 2023

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Ares in Survey No.356/8-2-2, (b) 9.10 Ares in Survey No.356/102-2, and (c) 15.36 Ares in Survey No.356/11-2-3 of Paravur Village, Paravur Taluk, Ernakulam District, Kerala State .” Thus it is evident that the secured asset comprises of three different items of the lands with building.

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Annexure-A9 is the copy of the Security interest ID Based Search report produced by the applicant. A perusal of the same shows that only two items of properties, ie., (a) 11.96 Ares in Survey No.356/8-2-2, (b) 9.10 Ares in Survey No.356/10-2-2 has been shown as registered with CERSAI on 29.09.2018 and that the third item of the property, ie., (c) 15.36 Ares in Survey No.356/11-2-3 has not been registered with CERSAI as on 29.09.2018.

¶35

A perusal of Annexure-B9, copy of interest ID Based Search report, which is produced by the defendants shows that the extent of land with residential house measuring 15.36 Ares was registered with CERSAI only on 04.06.2024. Indisputably, the measures under the SARFAESI Act 2002 and the Rules made thereunder were initiated by the defendants with issuance of Annexure-B1 Demand Notice on 02.07.2022.

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The provisions of Section 26 D of the SARFAESI Act, 2002 mandates as follows :

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“ 26D . Notwithstanding anything contained in any other law for the time being in force, from the date of commencement of the provisions of this Chapter, no secured creditor shall be entitled to exercise the rights of enforcement of securities under Chapter III unless the security interest created in its favour by the borrower has been registered with the Central Registry.”

¶38

Indisputably, Annexure-B1 Demand Notice was issued on 02.07.2022. In the Demand Notice as already observed, three items of properties is mentioned in the schedule. Similarly, in Annexure-A4 possession notice also, the above said three items of properties are mentioned in the schedule. Therefore, it is established that Annexure-B1 Demand Notice and A4 possession notice were issued without registering the security interest in respect of one item of the properties as stated above with CERSAI. In Annexure-A5 petition and A6 affidavit filed in MC No.1086/2023 also the physical possession has been sought for in respect of the aforesaid three items of the properties.

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Page 5 of 9

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SA No.24 of 2023

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In Goverdhan Prasad Atal Vs. Assam Gramin Vikash Bank & others [2021 KHC 2202] relied on by the Counsel for the applicant, the Hon’ble Gauhati High Court has held that the respondent bank cannot be allowed to proceed with the notice dated 21.11.2018 issued under Section 13 (4) of the SARFAESI Act, 2002 since the security interest over the property pertaining to the possession notice was registered with the Central Registry only on 30.11.2019 more than an year after issuance of the said notice. It has also been observed in the above cited judgment that there shall be no bar for the respondent bank to issue any fresh notice under the provisions of the SARFAESI Act, 2002 and the Security Interest (Enforcement) Rules 2002 after following the due process of law.

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This Tribunal holds that the above cited decision of the Hon’ble Gauhati High Court is squarely applicable to the facts and circumstances of the present case on hand. A perusal of the judgment rendered in Punjab National Bank Vs. Assistant Commissioner of State Tax (D-815) & others by the Hon’ble High Court of Judicature at Bombay (relied on by the counsel for the defendants) shows that there is no reference with regard to registration of security interest of the mortgaged property with CERSAI as per Section 26 D of the SARFAESI Act, 2002. Hence the afore cited judgment has no application to the facts of the present case.

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In Annexure-A6 affidavit which was filed in MC No. 1086/2023 before the Additional Chief Judicial Magistrate Court (MPs/MLAs) Ernakulam, the aforesaid three items of the properties are shown in the description of the property. Though, the affidavit was filed on 16.11.2023 after registration of the security interest over the item No.(c) 15.36 Ares in Survey No.356/11-2-3 with the CERSAI, failure or omission of the 2^nd defendant bank to register the security interest for the aforesaid item of the property with CERSAI prior to issuance of Annexure-B1 Demand Notice has rendered the subsequent measures initiated by the defendants in respect of issuance of Annexure-A4 possession notice and Annexure-A6 affidavit as illegal and invalid. Hence the order Annexure-A7 passed in MC No.1086/2023 is also liable to be set aside as invalid.

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In view of the foregoing reasons and discussions, this Tribunal holds that Annexure-B1 Demand Notice, Annexure-A4 possession notice and Annexure-A7 order liable to be set aside and that hence the applicant is entitled to get the reliefs sought for in the S.A. However,

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Page 6 of 9

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SA No.24 of 2023

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it is made clear that the defendants are at liberty to initiate the measures under the SARFAESI Act, 2002 and the Rules made thereunder afresh in respect of the secured asset.

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Resultantly, the SA No.24 of 2023 stands allowed. 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 08^th day of October, 2024.

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(Su. WILLYAHM) PRESIDING OFFICER

Mj/

Page 7 of 9

SA No.24 of 2023

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

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Sl. No.	Date	Particulars
1.	04.12.2022	True copy of the Valuation No.176/2022.	Report	Annexure-A1
2.	01.12.2022	True copy of the Valuation No.175/2022.	Report	Annexure-A2
3.	27.08.1993	True copy of the Sale No.4236/1993 of SRO Paravur name of MuhammadandNaseem	Deed in the a.	Annexure-A3
4.	19.11.2022	True copy ofthePossession Notic	e	Annexure-A4
5.	---	True copy ofpetition filed under	Sec.14	Annexure-A5
6.	---	True copy ofaffidavitfiled under	Sec.14	Annexure-A6
7.	06.04.2024	True copy of the order of Ad Chief Judicial Magistrate (MPs Ernakulam in MCNo. 1086/202	ditional /MLAs) 3	Annexure-A7
8.	29.04.2024	True copy of the notice iss Advocate Commissioner	ued by	Annexure-A8
9.	---	True copy of CERSAI regi certificate submitted before Judicial Magistrate CourtErnak	stration Chief ulam	Annexure-A9
10.	---	True cop of abstract of the state accounts.	ment of	Annexure-A10

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List of documents filed by the defendants along with the written statement

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Sl.	Date	Particulars
No.
1.	02.07.2022	True copy of Sec.13(2) Demand Notice underSARFAESI Act, 2002.	Annexure-B1
2.	--	True copy of the postal receipt with respect ofsending the postalarticle.	Annexure-B2
3.	---	True copy of the proof of the proof of delivery of DemandNotice duly signed	Annexure-B3

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SA No.24 of 2023

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		by the borrowers.
4.	---	True copy of the postal receipt with respect ofsendingPossession Notice	Annexure-B4
5.	---	True copy of the acknowledgement of Possession Notice by the applicant and proof of delivery of Possession Notice duly signed by the borrowers.	Annexure-B5
6.	23.11.2022	True copy of The New Indian Express daily for publication of possession notice.	Annexure-B6
7.	23.11.2022	True copy of the published in Mangalam daily for publication of possession notice.	Annexure-B7
8.	---	True copy of affixture report and photograph evidencing the affixture of Possession Notice dated 19.11.2022 on the secured asset.	Annexure-B8
9.	---	True copy of Security Interest Id Based Search Report.	Annexure-B9

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(Su. WILLYAHM) PRESIDING OFFICER

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Mj/

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Page 9 of 9

Naseema Jaleel v. Federal Bank

Case brief

What is this about?

What did the court decide?

Naseema Jaleel v. Federal Bank

Case brief

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What did the court decide?

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