Dismissed

Bharat Electronics v. Indian Overseas Bank

DRT1 Nov 2024SA/246/2024

Case brief

AI extract

What is this about?

A Securitization Application filed by borrowers challenging the classification of their accounts as NPA and the sale notices was dismissed. The Tribunal held that prior notice before NPA classification is not mandated, the Authorized Officer had proper authority, and the applicants failed to prove the reserve price was low.

What did the court decide?

Application dismissing the Securitization Application and leaving no costs awarded to any party.

Bharat Electronics versus Indian Overseas Bank — Insolvency and Bankruptcy | 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 1^st DAY OF NOVEMBER, 2024

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

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S.A No. 246 of 2024

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Between

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M/s. Bharat Electronics, V/3411, Ground Floor, Isha Arcade, Azhakodi Temple Mavoor Road, Kozhikode -673 004

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Representing its Managing Partner V. Mani.

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V. Mani, S/o. Sreedharan,

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Vazhayil House, Thiruvannoor Nada P.O,

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Kozhikode – 673 029.

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V. Unnikrishnan, S/o. Sreedharan, Vazhayil House, Thiruvannoor Nada P.O, Kozhikode – 673 029.

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K.Jayaprakashan, S/o. Chathukkutty, Sabitha Nivas, Pokkunnu P.O. Katcherikkunnu, Kozhikode – 673 013.

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Anandan, S/o. Balakrishnan Nair, 1/70 Ambadi House, G.A. College P.O., Kozhikode -673 014.

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SA No.246 of 2024

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Obaidullakhan, 28/3515, Pottammal, Kuthiravattom P.O., Kozhikode – 673 014.

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Sudheendran K.M., S/o. Krishnakurup, Geethalayam, G.A. College P.O., Kozhikode – 673 014.

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Supriya K.V., W/o. Unnikrishnan V. Vazhayil House, Thiruvannur Nada P.O., Kozhikode – 673 029.

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Asokan M., S/o. Velukutty, Munderi House, G.A. College P.O., Kozhikode – 673 014.

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Jithesh, Udayam, Kizhamad, Velliparamba P.O., Kozhikode – 673 008.

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Sunilkumar M., Munderi House, Iringallur P.O. Kozhikode – 673 019.

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Gauridas T., Thaliyath House, Meenchanda Arts and Science College P.O., Kozhikode – 673 018.

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Suraj T., Nadumkandathil House, Manassery P.O. Kozhikode – 673 062.

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Kamalam, Vazhayil House, Thiruvannur Nada P.O., Kozhikode – 673 029.

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Hariharan P.K., Paneerkandy House, Kommeri P.O., Kozhikode - 673 007.

--- Applicants

Page 2 of 7

SA No.246 of 2024

And

Chief Manager/

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The Authorized Officer, Indian Overseas Bank, Regional Office at Ernakulam, Vettukattil Buildings, Jose Junction, M.G. Road, Ernakulam – 682 016.

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The Branch Manager, Indian Overseas Bank, Mavoor Road Branch, Sobha Tower, I.G. Road, Kozhikode – 670 306.

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--- Defendants

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This Securitization Application coming on 28.10.2024 for final hearing before me in the presence of Ms. Shifa Latheef, Advocate appearing for the Applicants and Ms. Devayani Nair, Advocate appearing for the defendants and upon hearing arguments of learned Counsels for both the parties and 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 22.03.2024 seeking to set aside Annexure-A1 and Annexure-A2 demand notices, Annexure-A4 possession notice and Annexure-A4 Sale notice and to direct the 2^nd defendant bank to accept the repayment of the loan amount in instalments and to declare that classification of the loan accounts of the applicants as NPA is totally illegal and to set aside the same.

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The 1^st applicant is a partnership firm and applicants 2 to 13 are the partners of the 1^st applicant firm. Availment of loan against property for an amount of Rs.45,00,000/- and a term loan for an amount of Rs.85,00,000/- from the 2^nd defendant bank upon creation of security interest over the immovable properties, admeasuring a total extent of 48.50 cents in Kakkodi village, Kozhikode Taluk, Kozhikode District, comprising of 26.75 cents in Re.Sy.No.39/5 and 21.75 cents in Re.Sy.No.40/1 belonging to applicants 3, 5, 7, 9 and 15 and a total extent of 48.50 cents in Kakkodi village, Kozhikode Taluk, Kozhikode District comprising of 26.75 cents in Re.Sy.No.39/5 belonging to applicants 3, 6, 7, 8 and 15 and 21.75 cents in

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Page 3 of 7

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SA No.246 of 2024

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Re.Sy.No.40/1 belonging to applicants 3, 5, 7, 9 and 15 and a total extent of 6.50 cents of land and 1168 sq.ft. building in Rs.23-14519/2 of Panniyankara village amsom, desom, Kozhikode Taluk, Kozhikode district belonging to the applicants 3 and 14.

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The applicants have averred in the SA that loan installment was regularly paid upto 2023. But they have not specifically averred or admitted as to whether they were repaying the outstanding loan due without default. However, it is revealed from the written statement filed by the defendants that since the applicants committed default in repayment of the outstanding loan due, both the accounts of the term loan and loan against property were classified as NPA on 28.12.2022.

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Demand Notice dated 04.01.2023 Annexure-A1 pertaining to LAP and Demand Notice dated 24.01.2023 Annexure-A2 pertaining to term loan were issued to the applicants 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 receipt of the Demand Notices is admitted by the applicants. Indisputably, applicants neither sent any objection/representation to the demand notices nor did they clear off their liability due to the 2^nd defendant bank.

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Therefore, possession notice dated 19.07.2023, Annexure-A3 was issued for symbolically taking physical possession of the secured asset. Possession notice was affixed conspicuously on the secured asset as evidenced from Annexure-B4 copy of photograph. Possession notice was also published in two leading newspapers, one in English edition, The New Indian Express edition dated 25.07.2022 and another one in vernacular language, Deshabhimani edition dated 25.07.2022. Since the applicants failed to clear off their liability due to the 2^nd defendant bank, Annexure-A4 sale notice dated 20.02.2024 was issued. Sale was not materialized for want of bidders. The applicants have produced copy of payment receipt Annexure-A6 in order to show they paid an amount of Rs.10,00,000/- to the 2^nd defendant bank after issuance of Annexure-A4 sale notice.

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Subsequently, the applicants approached the Chief Judicial Magistrate Court Kozhikode and filed application Annexure-B5 and affidavit under Section 14 of the SARFAESI Act, 2002. Order came to be passed in MC No. 417/2024 for taking physical possession of the secured asset. The Advocate Commissioner issued notice dated 05.04.2024, Annexure-A5 to the applicants informing them that he would take physical possession of the secured asset on 30.04.2024. The applicants filed petition, IA No.1646/2024 challenging AnnexureA5 notice. This Tribunal vide order dated 04.07.2024 dismissed the above petition. The applicants preferred OP (DRT) No.238/2024 before the Hon’ble High Court of Kerala challenging the order of this Tribunal. Annexure-B6 judgment dated 24.07.2024 came to be passed

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Page 4 of 7

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SA No.246 of 2024

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by the Hon’ble High Court of Kerala directing the applicants to deposit 25% of the total outstanding within a period of one month. Admittedly, the above direction was not complied with by the applicants.

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It is contended by the applicants that without giving them an opportunity of being heard, the loan accounts were classified as NPA and that classification of loan accounts as NPA is in violation of the circulars issued by the RBI and that the person, who issued the Demand Notice is not authorized or empowered to issue the same and that the reserve price fixed in Annexure-A4 sale notice is very low since both the two items of the properties is worth of more than Rs.4 Crores and that the secured asserts are residential houses of applicants 9 and 14 and that therefore, the SA may be allowed as prayed for.

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The rival contention of the defendants is that since the applicants defaulted in repayment of the outstanding loan dues, their loan accounts were classified as NPA as per the guidelines of the RBI and that there is no violation in respect of issuance of Annexure-A3 possession notice and Annexure-A4 sale notice and that sale was not fructified for want of bidders and that application filed under Section 14 of the SARFAESI Act is duly supported by the affidavit which is in compliance with the requirements to the provisions of Section 14 of the SARFAESI Act, 2002 and that the judgment of the Hon’ble High Court of Kerala in OP (DRT) No.238/2024 for deposit of 25% of total outstanding was not complied with by the applicants and that the total outstanding as on 21.10.2024 is Rs.1,42,84,569.85 and that therefore, SA may be dismissed with costs.

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The provisions of Section 13 (2) of the SARFAESI Act does not contemplate issuance of any notice prior to classification of the loan accounts of the borrower as NPA. The applicants have not specifically averred in the SA as to how the classification of both LAP and term loan accounts as NPA is in violation of the circulars issued by the RBI. The applicants having failed to send any objection/representation to the Demand Notice is not entitled to raise the aforesaid issue now. In Annexure-A1 and A2 Demand Notices, the Authorised Officer who is the 1^st defendant herein has signed. Hence the contention of the applicants that Demand Notices were not issued by the Authorised Officer is absolutely incorrect.

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The applicants have not placed any material before this Tribunal to prove their contention that the reserve price fixed for the secured assets is very low and that worth of both items of the secured assets is more than Rs.4 Crores.

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Page 5 of 7

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SA No.246 of 2024

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In the SA, there is no specific plea or averment as to whether Annexure-B5 affidavit filed in MC No.417/2024 before the Chief Judicial Magistrate Court Kozhikode is not in compliance with the statutory requirements contemplated under Clause (i) to (ix) to the proviso of Section 14 (1) of the SARFAESI Act, 2002. The applicants have also not produced copy of the affidavit filed in MC No.417/2024 to show that the above said statutory requirements were complied with by the defendants. The applicants have also not raised any plea or averment in the SA as to whether the learned Chief Judicial Magistrate Kozhikode passed order for taking physical possession of the secured asset without having perused the contents of the affidavit and after having satisfied over the same. The applicants challenged only Annexure-A5 notice issued by the Advocate Commissioner. This notice has been issued pursuant to the direction given to the Advocate Commissioner in MC No. 417/2024 by the learned Chief Judicial Magistrate Kozhikode. Therefore, Annexure-A5 order is not a measure as contemplated under Section 13 (4) of the SARFAESI Act, 2002. In any event, the applicants have failed to prove and establish their case so as to get the reliefs sought for in the SA.

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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.246 of 2024 stands dismissed. 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 1^st day of November, 2024.

(Su. WILLYAHM)

PRESIDING OFFICER

Mj/

Page 6 of 7

SA No.246 of 2024

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

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Sl. No.	Date	Particulars
1.	04.01.2023	True copy of the Demand Notice issued by the defendants.	Annexure-A1
2.	24.01.2023	True copy of the Demand Notice issued by the defendants.	Annexure-A2
3.	19.07.2023	True copy of the possession notice issued by the defendant bank.	Annexure-A3
4.	20.02.2024	True copy of the E-auction sale notice issued by the defendant bank.	Annexure-A4
5.	05.04.2024	True copy of the possession notice issued by theAdvocate Commissioner	Annexure-A5
6.	09.05.2024	True copy of payment transfer receipt	Annexure-A6

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

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Sl. No.	Date	Particulars
1.	04.01.2023	True copies of the Demand Notice (LAP) and acknowledgement cards thereof.	Annexure-B1
2.	24.01.2023	True copies of the Demand Notice (Term Loan) and acknowledgement cards thereof.	Annexure-B2
3.	25.07.2022	True copy of paper published in the New Indian Express and Deshabhimani Kozhikode editiondaily.	Annexure-B3
4.	---	True copy of the affixture photographs	Annexure-B4
5.	---	True copy of petition, MC No.417/2024 Chief Judicial Magistrate Court Kozhikode and affidavit.	Annexure-B5
6.	24.07.2024	True copy of the judgment in OP (DRT) No.238 of 2024 of Hon’ble High Court of Kerala.	Annexure-B6

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(Su. WILLYAHM) PRESIDING OFFICER

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Mj/

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Bharat Electronics v. Indian Overseas Bank

Case brief

What is this about?

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Bharat Electronics v. Indian Overseas Bank

Case brief

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