An application under Section 17 SARFAESI Act challenging the seizure of schedule property under Section 14 was dismissed. The Court held the applicant failed to prove property was joint family asset and District Magistrate acted within jurisdiction.
Securitization Application dismissed; Interlocutory Applications disposed of; No costs.
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.
IN THE DEBTS RECOVERYTRIBUNAL - IAT HYDERABAD
DATEDTHISTHE 26TH DAYOF JUNE, 2024
PRESENT: GUMMADI GOPICHAND, PRESIDING OFFICER
sA.No.261/2022
Smt. Navneet Agarwal, D/o Shankarlar Agarwal, Aged 45 years, Occ:house wife, R/o m.no.8-2 -293 I 82 I PN I t52, pLOT nO.152, Sy.No.403 (TS No.1,Ward NO.9, Block NO.P), Shaikpet Village, Golconda Mandal, Hyderabad.
Presently temporarily residing at: P 20 12, Officers Enclave, MILITI, Giri Nagar, Pune-4 1 1025. Rep. by her Power of Attorney Mr. Kamal Kishore Mantri, S/o RamnivasMantri, Aged 52 years, Occ:business, Rlo 6-3-12471238, Raj Nagar, BS Makhta, Hyderabad-SOO O82.
..Applicant.
Versus
l.State Bank of India, Rep. by its Authorised officer, Stressed Assets Management branch-ll,
Kachiguda, Hyderabad
Counsel for the Applicant : Sri SharadSarLghi Counsel .for the RespondentsNo. 1&2 : Sri Alluri Kishnam Raju Respondents No.3 : Sri P.Pratap
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.:ORDER:-
The Applicant is residing in the application scheduleproperty i.e. house in Shaikpet, Hyderabad. Thegrand father of the Applicantby name LateSri Mahaveer Prasad Agarwal was doing cloth businessat Secunderabd with the capital investment having inheritedthrough his father and from the proceeds of the said business,he has raisedthe Applicant's father and his one brotherand four sisters.During the lifetime of the grand father of the Applicant, herfather established the business of steel manufacturing. After thedemise of the grandfather of the Applicant, his two sons and four daughters have orally partitioned the properties andfrom the shareof the Applicant's father, he has established the said steel business.The father of the Applicant also purchased the properties from the ancestralsource only and he himself has not made any self-acquisition of the property. The father of the Applicant has purchased the schedule property under an Agreement of Sale dt. 12.06.2008 vide document NO2289 I 2OO8 and then subsequently, registered as Sale Deed dt. 18.03.2015 vide document NO.1269/2015. When the Applicant has demanded for partition of the oroperties, the father of the was constrained to ;;;,;;;;;";;il" ;#ffiq, file partition suit on the fil;6f ri""@ tional Chief Judge, .J:.. City Civil Court vide O.S:No.248l2021 a.rd th6s'irne is pending for consideration. The Applicant l"6rdtliulflB. oit fact that the schedule property is mortgdged in favour of the'l,ujRespondent Bank by her father and hence the ,, bank was no-Lmade -. |i.: as party to the said
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suit. No notice was given to the Applicant by the lstRespondentBank and recently, she came to know that the lstRespondent Bank approached the Coilector and District Magistrate u/ s 14 ofthe SARFAESI Act, 2OO2. But no affidavit of the Authorized OIIicer of the Respondent Bank was filed before the Collector and District Magistrate and the District Magistrate has not passed reasoned order and the Collector and District Magistrate has nojurisdiction to entertain the application u/s 14 of the Act and it is only CMM, Hyderabad who has gotjurisdiction in respect of the schedule property. The appointment of the Tahsildar, Shaikpet to assist the Authorized officer of the Bank for taking physical possession of schedule property is not in accordance with the procedure under Section 14(1A) ofthe Act. Hence, the SA.
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Respondents No. 1&2 filed their Reply Statement denying all the adverse allegations made in the SA. It is contended that the father of the Appiicant, by name Shankarlal Agarwal purchased the schedule property in the name of himself and his son Anurag Agarwal through Regd. Sale Deed dt.18.03.2015 and there is no recital in the said sale deed to the effect that the schedule property is purchased from the proceeds of joint famiiy funds. Mr.Shankariai Agarwal and his son Sri Anurag Agarwal being absolute owners and possessors of the schedule property, created mortgage by deposit of title deeds with the l*t Respondent Bank, as a securit5r for the credit limits sanctioned to Respondent No.3 company. Since the loan accounts of Respondent No.3 became NPA w.e.f. 19.03. e Respondent Bank issued a demand notice dt.25.03.2 SARFAESI Act,2OO2 calling upon the borrov&'i rtgagors to pay the ft t, ' outstanding dues witfli4 but failed to do so. - ii" Subsequently, the Rdspo "d+r6Ufi{l&fiissr:rt,il possessionnotice dt.l6.O9.2O2l in respe6.1 ,gf ; Ofprtr'ry The present SA is barred by limitation is not fiie{qgithin 45 days from the date of taking .'asls6(. Respondents No. 1&2 are not parties the Applicant. KARTHA of
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the family is authorized under Hindu Law to deal with the properties including alienation for the benefit of the alleged joint family. If the father of the Applicant hasalso established the business of steel manufacturing from the share of the Applicant's father pursuant to the oral partition of the properties among his brothers and sisters, then the said business is for the benefit of alleged joint family and the mortgage created by Mr. Shankarlal Agarwal and Mr. Anural Agarwal in the loan account of Respondent No.3 is also for the benefit of the joint family. The schedule property is self acquired property of Mr. Shankariai Agarwal and it was not purchased with the joint family funds as alleged and in fact there is no joint family. The Respondent Bank made an application under Section 14 of the Act before the Collector and District Magistrate at Hyderabad and the District Magistrate passed an order dt.O3.O9.2O22 directing the Tahsildar, Shaikpet, Hyderabad to assist the Authorized Officer of the 1st Respondent Bank in taking physical possession of the schedule property. The secured creditor can approach either the Hon'ble CMM or the District Magistrate under Section 14 of the Act and it is incorrect to say that the Collector and District Magistrate, HyderabadDistrict has no jurisdiction to entertain the application under Section 14 of the Act. Pendency of the civil suit filed by the Applicant does not preclude the Bank to proceed u/s 14 of the Act for taking physical possession of the secured asset.Accordingly, Respondents No. 1&2 prayed for the dismissal of the SA.
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Polnt No.lilt
No.28 as follows: 2 6 Jr,!{ mf ,1 l !'.:'
28.1t is tlw dutg of octing as District Magistrate 14 of ttrc Act to
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insist that the bank complied properlg taith requirements under tlrc prouiso to sub-section (1) of Section 14 of tte Act. This is because the second prouiso to sub-section (1) of Sedion 14 of tte Act requires the Distict Magistrate to be satisfied about tLe contents of tle affidauit filed before him to pass suitable orders forpurpose of taking possessionof tle seanred assefs. "
He also relied on thejudgement of Honble High Court of Allahabad reported in AIR 20 1 5 ALLAHABAD 136 where it is held at Paras No. l0&1 1 as follows:
" 1 O. From tLe aforesaid decision of tLrc Supreme Court in Standard Chartered Bank (supra), u)e dre of tte opinion that tle word'shall'used in the first prouiso to Section 14(1) of ttrc Act is mandatory. It is an essential requirement for the Bank that the application filed under Section 14 must be accompanied by an afftdauit dulg affirmed bg the Authorized Officer of the seanred creditor indicating the ingredients contemplated under sub-clause (i) to sub-clause (ix) to tle first prouiso. Non-filing of the affidauit in our opinion uould be fatal.
ll..Sri TatunVenna, leamed counsel for the bank has conceded that in the instant case no afftdauit utas filed. Consequentlg, the application could not haue been allowed by the District Magistrate."
The Applicant also relied upon the judgement of F*on'ble Apex Court between Standard V. Noble Kumar & others reported in (2013) 9 where it is held at Para No.25 which is
25" The under the second Magistrate to made in such an {...-Imt not the legalniceties of the
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tronsaction. It is onlg after recording of hi,s satisfaction the Magistrate can pclss appropiate orders regarding taking of possession of the secured asset".
He also relied upon another judgment of Hon'ble High Court of Hyderabad between K.T. Vijay Kumar Vs. Union Bank of India in W.P.No.35956 /2017 where it is held at Para No.4 which is as follows:
4."perusal of the order under challenge reJleds ttat ttte Chief Metropolitan Magistrate, Vijagautada, directed the aduocate commissioner appointed bg him to take ttre assistance of local Ieaders so as lo seqfie the possession of tlrc secured asset. In this regard, reference mag be made to Section H(2) of tLre SARFAESI Act tuhich empowers tte Chief Metropolitan Magistrate concemed to take or cattse to be taken such steps and use, or cause to be used, such force, as maA, in his opinion, be necessary. Needless to state this pou.;er utould haue to be exercised tegitimately by use of lauful means. In furttrcrance thereof, it would be open to the Chief Metropolitan Magistrate concerned to direct the aduocate commissioner to take tlte assistance of lau enforcement agencies, such as the police, but assistance of local leaders cannot be brought within the ambit of forcefulmeansrecognised bg law forsecttring compliance.The direction of the Chief Metropolitan Magistrate, Vijagautada, to the effect that the aduocate ammissioner should take tlw assisfance of local leaders is therefore unsustainable in laut."
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Section 14(1) of the SARFAESI Act, 2OO2 for taking physical possession of the secured asset and so, the order passed by the Collector and Distract Magistrate, Hyderabad District is quite legal and valid and it is binding on the Respondent No.3 and the Applicant is not having any right to challenge the proceedings issued by the Collector and District Magistrate, Hyderabad District. It is further argued that the Applicant has filed partition suit by colluding with her father in order to delay the recovery proceedings initiated by the lst Respondent Bank against the schedule property. The Applicant also failed to establish that the schedule property was purchased by her father withjoint family funds.
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steel business and for business purpose, he borrowed money from the lst Respondent Bank by mortgaging the schedule propert5r. So when the schedule property is mortgaged by Sri Shankarlal Agarwal for the purpose of doing business which, according to the Applicant is joint family business, now she cannot contend that the Ist Respondent Bank cannot proceed against the schedule property. t2. A perusal of the order passedby the Collector and District Magistrate, Hyderabad Districtdt.o3. 09.2022 clearly indicates that the Collector and District Magistrate has carefully examined all the material placed before him and after satisSing with the contention of the lst Respondent Bank, the District Magistrate issued proceedings in File NO.B1l366357 12022 dt.O3.O9.2022 directing the Tahsildar, Shaikpet to assist the Authorized Officer of the lst Respondent Bank in taking physical possession of the schedule propert5r. So, it cannot be said that the District Collector cum District Magistrate, has not passed reasoned order for taking physicai possession of the schedule property. It cannot be said that the Tahsildar, Shaikpet, Hyderabad is not a subordinate of the Collector and District Magistrate, Hyderabad District. So the contention of the Ld. Counsel for the Applicant that the Collector and District Magistrate, Hyderabad District is not empowered to direct the Tahsildar, Shaikpet, Hyderabad to take physical possession of the schedule propert5r u/s 14 of the Act, is not tenable. No material is placed by the Applicant to estabiish that the Collector and District Magistrate, Hyderabad District has not followed the procedure laid down u/s 14 of the SARFAESI Act,2OO2 in passing the impugned order dt.03.09.2022.
'lc
So, considering all thelj6-_p:6Srgrp--lthold that the Applicant has failed to establish tta{i* itilq$. ;idijrifo is joint famity properry of the Applica.rt ard,oilie.s. ".rdioifi..". fr#h".,Furiller. t he Eiodlicant fr.'$fp"..rt bein gs a 3r ad po art yv is not having tocus $1qJ',ai 0 e*illpqhe pfu$edings initiated by the Respondents No. l&2-3'befpre the Collecto(' . afid District Magistrate, Hyderabad District for't{{gS physical'possession of the schedule property u/s 14 of theSAdFA.ESJ'llia,2OO2. So, the present SA filed
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by the Applicant is liable to be dismissed as there are no merits. Accordingly, this point is answered against the Applicant and in favour of the Respondents No. 1&2.
Polnt No.lll)r
(Diclated. to the P.A, traflscribed. bg he/, (nftected sig ed. and pronoun ed by me in the open court on this tlle 26 daA ofJune, 2024).
sd/(G. GOPI CHANDI PRESIDING OFFICER
2 E Jiti'l 1?!
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3 issues framed by the court
Whether the applicant is entitled to challenge the proceedings initiated by the Respondents under Section 14 of the SARFAESI Act, 2002 to take physical possession of the schedule property?
Whether the schedule property constitutes joint family property such that its mortgage is for the benefit of the family and challenges are permissible?
Whether the District Magistrate has jurisdiction to execute Section 14 proceedings and pass reasoned orders without a filed affidavit by the Authorized Officer?
3 provisions across 1 enactments
Smt. Navneet Agarwal
State Bank of India
The Authorized Officer, DlvIIaSME EB Branch
M/s Navneeta Steels P.Ltd.
GUMMADI GOPICHAND
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
