Allowed

Sri Pasumarthi Ashwin Kumar v. Bhadradri Co-Operative Urban Bank Limited

DRT25 Jan 2024SA/311/2023

Case brief

AI extract

What is this about?

The Debts Recovery Tribunal allowed an application filed under Section 17 of the SARFAESI Act, 2002, holding that a bank could not initiate enforcement proceedings or issue a sale notice because it had not registered the security interest with the Central Registry as mandatory under Section 26. The court directed the bank to restore possession.

What did the court decide?

Sale Notice set aside; Respondent directed to redeliver possession within one week; Applicant awarded costs.

Sri Pasumarthi Ashwin Kumar versus Bhadradri… — Pension and Retirement Benefits | DRT (2024)

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IN THE DEBTS RECOVERYTRIBUNAL.I AT HYDERABAD DATED THIS THE 25TH DAY OF JANUARY,2c.24

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PRESENT: GUMMADI GOPICHAND, PRESIDING OFFICER

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SA.No.3 t | /ZO2S

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Sri PasumarthiAshwinkumar S/o RamanaRao, Occ:business, R/o Flat No.403, Sai Mana pride Apartments, Jubleepura, Khammam Citv and District Telangana -507 003.

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Presently residing from 28.03.2023 at Plot No.3, Road No.1, Viadehi Nagar, Vanasthalipuram, R.R. District.

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...Applicant.

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Versu-s

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M/s Bhadradri Co-operative Urban Bank Ltd., Having its Head Oflice at #3-1-17&18, Sunder Talkies Road, Gandhi Chowk, Khammam.

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Rep. by its Authorized Officer Sri Jana Satyanarayana Murthy

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Respondent.

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Counsel for the Applicant Counsel for Respondent

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Si Arun Kumar Satgauolu Si Veera Shiua Kumar

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.:ORDER:-

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This application is frled by the Applicant u/s.17 of the sARFAESI Act, 2002 challenging the Auction Sare Notice dt.os.og.2o23, issued by the Respondent against the application schedule property and for restoring physical possession of the secured asset to the Applicant.

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made in the application, in brief, are as under,_

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of the partners of M/s A&P Motors which availed credit t. The Respondent sanctioned a loan of Rs.1g for the purpose of clearing the housing loal due to the r-J Allahabad schedule property was mortgaged to the Respondent as '-"i^.]L

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&tt#

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5,A.No,311/2023

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security to the above loan and the Applicant executed Memorandum of Deposit of Title Deed vide Document No.9O24 /2016 dt.30.08.2016. In view of the default committed by the Applicant in repa5mrent of dues, the Respondent initiated SARFAESI proceedings by issuing demand notice dt.22.O9.2O21 u/s 13(2) of the SARFAESI Act, 20O2. Thereafter the Respondent issued PossessionNotice dt.23.),7.2021 u/s l3(4) of the Act and later taken physical possession of the schedule property on 16.07.2023 by break opening the lock. Thereafter, the Respondent issued Sale Notice dt.05.08.2023 for conducting auction of the schedule property without following the procedure as contemplated under the provisions of SARPAESI Act,2OO2. It is also contended that as per the provisions of SARFAEIS Act, 2OO2, registration of the security interest is mandatory by the secured creditor as per the provisions of Sections 20 to 26,268,26C & 26E of the Act but the Respondent without registering the security interest, proceeded for taking physical possession of the schedule property and in issuing sale notice. Hence, the SA.

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Respondentfrled its Reply Statement denying the adverse allegations made in the application. The contentions of the Respondent, in brief, are as under-

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M/s A&P Motors had defaulted i., pay-g loan amounts and as such, the loon accounts were declared as NPA. The Respondent issued Demand Notice dt.22.O9.2O21 u/s 13(2) of the Act and the same was served on the Applicant. Later, the Respondent issued Possession Notice dt.23.l1.2O21 and, the same was personally served on the Applica-nt and other guarantors zrnd a-lso alfixed on the schedule property and published in two daily newspapers. The Respondent subsequently taken physical possession of the schedule property u/s 14 of the Act. The Respondent has duly followed the procedure laid down under the provisions of SARFAESI Act ald Rules, 2002 and there are no violations. Accordingly, t prayed to dismiss the SA.

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Heard both the Ld.Coun pe.usiifl,[r,e brought on record. ,' !:) 5. Now, the points that cofs$egflior91p,-^Y:"; Whether the ?.,:!*Niioooticant^{in fauour of the} Respondent

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SA.No.j11/2023

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Central ReSisW o.s contemplated under Section 26(8) of tte SARFAESI Act, 2002 ?

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ii) To what relieJ?

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Polnt No.ll)t

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During the course of arguments Ld. Counsel for the Applicant and tJ:e Ld. Counsel for the Respondentreiterated their respective versions as stated supra.

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Ld. counsel for the Applicant argued that as per the provisions of Section 26(B) ol SARFAESI Acr, 2oo2, every security interest created in favour of the Financial Institution or the Bank shafl be registered with the centrar Registry but in the present case, the Respondent has not registered the mortgage created by the Appricant in favour of the Respondent and so, the Respondent is not entitled to exercise the right of enforcement of securities under chapter III of the SARFAESI Act, 2oo2. so, the steps initiated by the Respondent for taking physicar possession of the schedule property and in issuing sale notice are illegal and accordingly, the Respondent is liable to re-deliver the schedule property to the Applicant.

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S Ld counsel for the Respondent argued thatthe security interest created by the Applicant in favour ofthe Respondent was not registered with the central Registry by the date of taking physical possession of the schedule propertSr however, subsequently, it was registered with the Central Registry.

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section 26(u') of the SARFAESI Act,2oo2 deals with registration of security interest by Secured creditors and other creditors which is as forlows:

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"26(8) (1) The Central Gouernment mag bg notirtcation, ertend. the proui.sions of Chapter IV relating to Central Regi"stry to all creditors otler than seanred creditors as defined in clause (zd.) of sub_section (1) of Section 2, for creation, modification or satisfaction of ang secuitg interest .rA}l 'lPl : ouer anA propertA of the bonouter for the pufpose of secuing due repagment of ang financial assrisrance granted bg such creditor to the borrouer".

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sA. No.311/2023

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Admittedly, in t,e instant case, t]-re Respondent has not registered the security interest created by the Applicant over the schedule property with the central Registry before initiating proceedings under the provisions of SARFAESI Act, 2OO2. So, without complying with the provisions of Section 26(8) of the Act, theRespondent straight away proceeded for taking physical possession of t].e schedule property and in fact, arso issued SaIe Notice dt.O5.08.2023 for conducting auction of the schedule property. Unless and until the security interest created in favour of the secured. creditor is registered with the centra.r Registry, the Secured creditor is not entitled to exercise the right of enforcement of securities and the same is mentioned in Section 26(D) of SARFAESI Act, 2002 which reads as follows:

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26(D) Right of enforcement of seanrities: "Notutithstand.ing angthing contained in ang other law for the time being in force, from the d.ate of commencement of the prouisions of this chapter, no secured. creditor stalr be entitred to exercise the rights of enforcement of secaities und.er chapter III unress the secuitg interest created in its fauour bg the borrower has been registered with the Central Registry'.

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So, in view of the bar under Section 26(D) of the SARFAESI Act, 2002, the Respondent Barlk is not entitled to proceed against the schedule property for taking physical possession and as well as for conducting auction as t,.e security interest created in respect of the schedule property was admittedly not registered with the Central Registry not only by the date of issuing possession notice and also by the date of taking physical possession of the secured asset.

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As such, the above steps initiated by the Respondent for enforcement of interest are not in accordance with law and so, the Respondent is the possession of the schedule property to the petitioner as ard untenable. The Sa.le Notice dt.05.0g.2023 issued bythe the schedule property is also illegal and accordingly, ? 5 ria$r"Z0il aside. In view of t]:e above discussion and facts and the case, this point is answered in favour of the Applicant Respondent.

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SA.No,311/202j

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Polnt No (lil

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In the result, SA 311/2023 is allowed with costs. Accordingly, the impugned measures initiated by the Respondent for taking physical possession of the secured asset under section 14 of the SARFAESI Act, 2oo2 and subsequent Sa-le Notice dt.o5.o8.2023 issued by the Respondent in respect of ttre schedule property are hereby set aside. The Respondent is hereby directed to redeliver the possession of the schedule property to the Applica,t within one week from the date of receipt of this order under panchalama. The Applicant is entitled for costs of the application.

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Communicate a copy of this Order to the parties concerned.

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(Dctated to the P-A., transcibed by her, corrected, signed. and. pronounced bg me in th.e open court on this the 25rh daA of January, 2024).

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sdllG.^coPrcHANDl PRESIDING OFFICER

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TRUE^GOBY fi.e.'P^^,1!ffi Asst.^Rsgistrar ORT.T,^HYDE*!.EBD.

Sri Pasumarthi Ashwin Kumar v. Bhadradri Co-Operative Urban Bank Limited

Case brief

What is this about?

What did the court decide?

Sri Pasumarthi Ashwin Kumar v. Bhadradri Co-Operative Urban Bank Limited

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

All orders in this case

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