Dismissed

Sreehari Satheesh v. State Bank of India

DRT1 Nov 2024SA/291/2022

Case brief

AI extract

What is this about?

Debts Recovery Tribunal dismissed the applicant's secutrization application challenging a bank's NPA classification and enforcement measures. Relying on precedent, the Tribunal held the applicant waived challenges to the NPA classification by seeking loan regularization via High Court, rendering the proceedings valid.

What did the court decide?

Securitization Application dismissed; costs of Rs.10,000 payable by applicant to defendant.

Sreehari Satheesh versus State Bank of India — 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 01^st day of November, 2024

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SECURITIZATION APPLICATION No.291/2022

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Between

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Sreehari Satheesh, S/o.K.N.Satheesh, Sreevilasam, Thiruvathukal, Karapuzha P.O, Kottayam -686 003. …Applicant

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And

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State Bank of India, Stressed Asset Recovery Branch, Palarivattom, Pin-682024, represented by its Authorized Officer. . …Defendant

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This Securitization Application having been heard on 08.10.2024 in the presence of Advocate Moly E.V for the applicant and Advocate K.K.John & Advocate Asish K.John for the defendant 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 by the applicant under S.17(1) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as ‘the SARFAESI Act’) challenging the securitization measure initiated by the defendant with a prayer to set aside the possession notice as well as the sale notice issued by the defendant for e- auction of the secured asset.

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SA/291/2022

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Brief facts of the case :

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In the SA the applicant has pleaded that he is coborrower and co-mortgagor for the term loan of Rs.34,70,000/sanctioned by the defendant on 16.02.2018 for the construction of commercial building. After availing the loan, a three storied commercial building is constructed using the amount sanctioned by the defendant. Due to Covid -19 pandemic nobody turned up to take the said house on rent. Consequently, the applicant converted the same to a residential building for their occupation. There are 18 small shop rooms over the subject matter property since the time of applicant’s grandmother, who was the owner of the property. The said shop rooms were renovated and tenants agreed to enhance the rent to Rs.70,000/- per month in aggregate. After availing the loan, the applicant was repaying the installments regularly, but due to lockdown from March, 2020 due to Covid -19 pandemic, the applicant and his family could not pay the loan and the defendant cautioned the applicant about the slipping of the account as NPA. The applicant deposited Rs.18,37,700/- in the loan account in spite of adverse situation during covid period. Due to irregular in repayment the defendant classified the loan as NPA and issued demand notice dated 16.07.2021 under Section 13(2) of the SARFAESI Act marked Annexure A2. On failure on the part of the applicant to pay the amount, the defendant proceeded to take symbolic possession of the secured asset on 09.11.2021. The applicant approached the Hon’ble High Court of Kerala by filing WP(C).No.1678/2022 seeking reasonable time to pay the overdue amount in the loan account and

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SA/291/2022

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the Hon’ble High Court directed the defendant to get instruction on the overdue amount for regularization of the loan account and also granted an interim stay subject to deposit of Rs.4,00,000/- on or before 07.03.2022. However, the applicant could not remit the total amount as per direction of the Hon’ble High court. Thereafter, the defendant proceeded with further coercive measure by filing MC.No.104/2022 under section 14 of the SARFAESI Act and an Advocate Commissioner, appointed in such proceeding, issued notice to take physical possession of the secured asset. The defendant has also issued sale notice for e-auction of the secured asset. Being aggrieved with the measure taken by the defendant the present SA is filed challenging the securitization proceeding including the notice issued by the Advocate Commissioner marked Annexure A5 and sale notice marked Annexure A6.

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The defendant contested the claim of the applicant by filing written statement contending inter alia that the applicant along with his father, mother and brother availed term loan of Rs.34,70,000/- on 16.02.2018 for the purpose of construction of a commercial building by agreeing to repay the loan amount in 71 monthly installment of Rs.74,872/each commencing from 16.02.2019. The repayment into the loan account was irregular. Consequently, the loan account was classified as NPA on 20.03.2021 as per the guidelines and directions of RBI. The demand notice under Section 13(2) of the SARFAESI Act was served on the borrower and the guarantor as per the statutory requirement. But no amount was received and accordingly the measure under Section 13(4) of the SARFAESI Act was initiated on 09.11.2021 and symbolic possession

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SA/291/2022

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of the secured asset was taken, after following all the statutory requirement. The applicant did not comply the order passed by the Hon’ble High Court of Kerala in WP(C).No.1678/2022. Consequently, the further step was taken by filing MC.No.104/2022 under Section 14 of the SARFAESI Act before the Chief Judicial Magistrate Court, Kottayam for taking physical possession of the secured asset and also issued sale notice dated 13.05.2022 for e-auction of the secured asset on 30.06.2022 after giving clear 30 days’ notice to the applicant. All the statutory provision are duly complied in issuance of such notices. All the statutory measures are duly followed no interference is necessary in the securitization proceeding initiated by the defendant. Hence the SA being devoid of any merit may be dismissed.

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From the respective case of the applicant and the defendant, the following points are emerged for adjudication in this case:

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(i) Whether the securitization proceeding initiated by the defendant suffers from any illegality or irregularity and defect to intervene with the same?

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

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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. During the course of argument, the learned counsel for the applicant

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SA/291/2022

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did not dispute about availing of loan and irregularity in repayment, but contended that the classification of the loan as NPA is in violation of the order passed by the Hon’ble Apex Court in Writ Petition(s)(Civil) No(s).825/2020 dated 03.09.2020 in the case of Gajendra Sharma vs Union of India and another . As per the order the accounts which were not declared as NPA till 31.08.2020 shall not be declared NPA till further orders. The said order was vacated by the Hon’ble Apex Court on 23.03.2021. Hence the classification of loan account as NPA on 20.03.2021 is illegal. Consequently, the entire securitization proceeding is vitiated and hence the SA may be allowed by setting aside the measure taken by the defendant. No other point was raised by the learned counsel for the applicant except challenging the classification of loan as NPA.

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Per contra, the learned counsel for the defendant did not dispute about the classification of the loan as NPA on 20.03.2021. It is contended by the learned counsel for the defendant that in the SA the applicant has not challenged the classification of NPA in violation of the order passed by the Hon’ble Apex Court. This issue was raised by the applicant for the first time during argument which is not at all permissible. Besides the same after getting possession notice the applicant filed WP(C).No.1678/2022 before the Hon’ble High Court of Kerala seeking to repay the overdue amount on installments. The Hon’ble High Court passed an order permitting the applicant to deposit Rs.4,00,000/- which the applicant failed to comply. No issue was raised by the applicant before the Hon’ble High Court about the illegality in classification of loan as NPA. Hence disputing the classification of the loan as NPA at this stage is not permissible. The

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SA/291/2022

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loan was classified as NPA as per the guidelines of RBI, but no step was taken by the defendant in initiating securitization proceeding when the order of the Hon’ble Apex Court was in force. After vacation of the interim order; the demand notice was issued and further measure was taken under the SARFAESI Act, which cannot be said as illegal. Further it is contended that the sale notice Annexure A6 did not fructify due to want of bidders. No further step is taken for e-auction of the secured asset. Hence the applicant is not entitled to get any relief in this SA.

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On evaluation of the contentions of both sides, there is no dispute about availing of loan by the applicant and there was default in repaying the installment. On perusal of the statement of account filed by the applicant marked Annexure A1 it is seen that no installment is paid on regular basis in the loan account from time to time and the some remittance was made according to the convenience of the applicants. On the date of classification of the loan as NPA on 20.03.2021 the loan was not regular. It is also seen from the record that the defendant has not proceeded with the securitization measure immediately after classification of loan account as NPA and the demand notice was issued on 16.07.2021 when the order passed in Gajendra Sharma (Supra) was vacated vide order dated 23.03.2021 in WP(C).No.476/2020. It also appears from the record that the applicant has filed one WP(C).No.1678/2022 before the Hon’ble High Court of Kerala seeking permission to deposit the overdue amount in reasonable time. The Hon’ble High Court permitted the applicant to deposit Rs.4,00,000/- on or before on or before 07.03.2022, which was not complied. Subsequently, the writ

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SA/291/2022

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application was disposed due to non-compliance of the order. After receipt of demand notice the applicant has not raised any objection challenging the classification of loan account as NPA nor disputed the claim amount. It is also not disputed by the applicant that at the time of passing the interim order by the Hon’ble Apex Court, the loan account was not standard or regular account. In a judgment of the Hon'ble Apex Court reported in (2022) 2 SCC 221 in the case titled

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Arce Polymers Private Limited v. Alphine Pharmaceuticals

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Private Limited and others, it is held at paragraph 18 as follows:-

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“18. ……….. Taking into consideration the entire facts of the case, which perspicuously reflect disingenuous conduct on part of the Borrower to gain indulgence, unfulfilled assurances and promises, their unwillingness to pay, and in light of the law laid down by this Court, we are of the view that the Borrower has waived and is estopped from challenging violation of Section 13(3A) of the SARFAESI Act and hence, the first issue is decided in favour of the Bank………”

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The applicant having approached the Hon’ble High Court for regularization of loan account by paying the overdue amount after issuance of possession notice it can be inferred that the applicant has waived the illegality, if any, in the classification of loan account as NPA by his expressed conduct and now he cannot turn back in challenging the classification of loan account as NPA, which is also not raised in the SA in view of the ratio decided by the Hon’ble Apex Court in the case of Arce Polymers Private Limited (Supra) . The applicant has not challenged other measures taken by the defendant in the securitization proceeding during the argument. In such premises, it cannot be said that there is any procedural illegality in the securitization measure to intervene with the same. Hence the applicant is not entitled to get any relief in the SA. Hence both the points are answered against the applicant.

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SA/291/2022

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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, being devoid of any merit, is hereby dismissed with costs of Rs.10,000/- (Rupees ten

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thousand only), payable by the applicant to the defendant.

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(Dictated to my steno, corrected and pronounced by me in the open Tribunal on this the 01^st day of November, 2024)

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PRESIDING OFFICER

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[SOVAN KUMAR DASH]

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SA/291/2022

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Documents on the part of the Applicant

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Annexures Particulars of documents

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Annexure-A1 True copy of the statement of account dated 27.05.2022. Annexure-A2 True copy of the demand notice dated 16.07.2021 issued under Section 13(2) of the SARFAESI Act by the defendant to the applicant. Annexure-A3 True copy of the possession notice dated 09.11.2021 issued by the defendant to the applicant. Annexure-A4 True copy of the interim order in WP(C).No.1678/2022 of the Hon’ble High Court of Kerala. Annexure-A5 True copy of the notice dated 30.04.2022 received from the Advocate Commissioner.

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Annexure-A6 Ture copy of the sale notice dated 13.05.2022. Annexure-A7 True copy of the judgment in WP(C).No.1678/2022.

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Documents on the part of the Defendant

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Annexure-B1 True copy of the postal acknowledgement signed by/for the applicant. Annexure-B1 True copy of the postal acknowledgment signed for the (a) firm M/s.Konneparambil Arcade. Annexure-B1 True copy of the postal acknowledgment signed by/for (b) the firm Co-mortgager Mrs.Sainaba Satheesh. Annexure-B1 True copy of the returned envelope addressed to the (c) co-mortgagor Mr.Sreedath S Annexure-B1 True copy of the publication of demand notice in the (d) New Indian Express (English) daily dated 02.09.2021. Annexure-B1 True copy of the publication of demand notice in the (e) Mathrubhumi (Malayalam) daily dated 02.09.2021. Annexure-B2 True copy of the possession notice containing signature of the mortgagors for having received the notice dated 09.11.2021. Annexure-B2 True copy of photograph showing affixture of (a) possession notice. Annexure-B2 True copy of the publication of possession notice in the (b) New Indian Express (English) daily dated 11.11.2021. Annexure-B2 True copy of the publication of possession notice in (c) Mathrubhoomi (Malayalam) daily dated 11.11.2021. Annexure-B3 True copy of the postal acknowledgment signed by/for the applicant dated 20.05.2022. AnnexureTrue copy of the postal acknowledgments signed for

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SA/291/2022

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B3(a) the firm M/s.Konneparambil Arcade dated 20.05.2022. AnnexureTrue copy of the postal acknowledgment signed by/for B3(b) the co-mortgager Mrs. Sainaba Satheesh.

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AnnexureTrue copy of the returned envelope addressed to the B3(c) co-mortgager-Mr.Sreedath S

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AnnexureTrue copy photograph showing affixture of sale notice B3(d) on 31.05.2022.

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AnnexureTrue copy of the publication of sale notice in the New B3(e) Indian Express (English) daily dated 15.05.2022. AnnexureTrue copy of the publication of sale notice in B3(f) Mathrubhoomi (Malayalam) daily dated 15.05.2022.

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Annexure-B4 True copy of letter of arrangement issued by defendant bank to the applicant and his co-owners dated 16.02.2018.

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Annexure-B5 True copy of the letter of confirmation for creation of mortgage by deposit of title deeds executed by the applicant and his co-owners dated 17.02.2018.

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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 01^st November, 2024

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SA.No.291/2022

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Between Sreehari Satheesh …Applicant And State Bank of India, Stressed Asset Recovery Branch. …Defendant