The Tribunal dismissed an application by a third-party supplier seeking to retrieve stored goods from a secured premises possessed by a bank under SARFAESI proceedings, holding that the bank had the right to seize all movable properties in the schedule after the demand notice.
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.
SA No.343/2024
Fair Order
IN THE DEBTS RECOVERY TRIBUNAL AT MADURAI
DATED THIS 22nd DAY OF OCTOBER, 2024
PRESENT: SEEMA SINHA
[PR. DISTRICT & SESSIONS JUDGE - Retd] PRESIDING OFFICER
SA No. 343/2024
M/s. Sri Murugar Spinning Mill, Rep. by its Partner, Sri. D. Naresh Kumar, Having its office at, No. 23, 2nd Layout, School Road, Krishnaswamy Nagar, Ramanathapuram, Coimbatore – 641 045. --- Applicant
-Vs-
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SA No.343/2024
No. 2/120, Post Box No. 7, Renganathapuram Street, Dhalavaipuram – 626 188, Rajapalayam, Virudhunagar District.
No. 299, Srivilliputhur – Chatrapatti Road, Arasiyarpatti, Vaithiyalingapuram Post, Rajapalayam-626 165, Virudhunagar District.
Appearance of Advocates:
Mr. D. Kirubakaran ---- Counsel for the Applicant Mr. ARM Ramesh ---- Counsel for the 1st Defendant Bank
This SARFAESI Application was heard in the presence of Counsels for the Applicant and the 1st Defendant Bank and fixed for passing final order before me and upon hearing the arguments of the Counsels and having stood over for consideration till this day, this Tribunal delivered the following:
O R D E R
1 . This Application has been filed under Sec.17 of the SARFAESI Act, 2002 by the Applicant praying that this Hon'ble Tribunal may be pleased to direct the 1st Defendant to open the lock and seal of 4th Defendant premise which is mentioned as Item No. 4 in the order passed in Crl.M.P.No. 11585/2023 dated 05.01.2024 by the Hon'ble Chief Judicial Magistrate, Srivilliputhur, Virudhunagar District and hand over the non-hypothecated goods of cotton, raw materials, yarn, threads belonging to the Applicant which were supplied through delivery challans dated 22.01.2024, 19.02.2024 & 18.03.2024 totally for a quantity of 18809.10 tons to the 3rd Defendant from the 4th Defendant premises and pass such other order or orders as this Hon'ble Commission may deem fit and proper under the circumstances of the case.
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2 . The brief averments of the Application filed by the Applicant are as follows:-
The Applicant submitted that the Applicant is a 3rd party and a partnership firm whose main object is to manufacture and sell yarn, made from Polyester and raw cotton, and other suitable materials, as well as to operate a spinning and weaving mill in the Coimbatore District. The 4th Defendant, a private limited company is the owner of the subject property, in which the third Defendant is a tenant under a lease agreement dated 15.07.2023. The Applicant manufactures yarn internally and pays thirdparty job-workers to convert Polyester/cotton into PC/Polyester thread/yarn in accordance with a principal-to-principal agreement with converters.
It is further submitted that they entered into a Yarn Conversion Work Agreement with the third Defendant on 17.07.2023. According to the provisions of the agreement dated 17.07.2023, the Applicant would supply Polyester and raw cotton types to the 3rd Defendant, who would turn them into yarn. The Applicant agreed to pay conversion charges and an advance of Rs. 20,00,000/- (Rupees Twenty Lakh only) which was to be adjusted after one month at Rs. 1,00,000/- per month from the date of the agreement against the job work bill raised by the 3rd Defendant herein. The Applicant's raw cotton, polyester stocks and finished yarn stored in the leased premise of the 3rd Defendant situated at (i) 101 cents in S.No. 51/3 (ii) 86 cents in S.No. 51/2 and 2/5th right in the Well, etc., S.No. 50/2 (iii) 6 cents on the Southern side out of 6.61 acres in S.No. 53 (iv) 58 cents in this North out of 95 cents in S.No. 52 & 142 cents on the North out of 6.61 acres in S.No. 53 within Arasiyarpatti Village, Rajapalayam Taluk, Virudhunagar District and owned by the 4th Defendant herein.
It is further submitted that the 3rd Defendant halted dispatching the conversion of yarn from 22.01.2024 to the Applicant, and that the 3rd Defendant withheld Polyester/Cotton, Polyester Yarn, Polyester Cotton Yarn and waste to the quantity of 18.80 Tons belonging to the Applicant since January 2024 on the ground that they required more money in addition to the conversion charges and a lack of employees. The Value of Delivery
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Challan amounts to Rs. 19,86,510/- (Rupees Nineteen Lakhs Eighty Six Thousand Five Hundred and Ten only). It appears that the 1st Defendant Bank had issued a Possession Notice dated 02.08.2022 and initiated recovery measures under the SARFAESI Act from the 4th Defendant's failure to repay loan facilities obtained from the 1st Defendant Bank. Hence, the 1st Defendant Bank has filed an Application u/s. 14 of the SARFAESI Act, 2002 before the Ld. Chief Judicial Magistrate, Srivilliputhur in Crl.MP.No. 11585/2023, which was allowed on 05.01.2024 and the outstanding liability will be about Rs. 9,05,91,520.88p as on 01.08.2022. The 1st Defendant Bank took Physical Possession of the 4th Defendant's unit on 21.03.2024, after the receipt of the order dated 05.01.2024, passed by the Ld. CJM, Srivilliputhur, Virudhunagar District. Furthermore, the 1st Defendant Bank has taken moveable's belonging to the Applicant's firm, valued at Rs. 48 Lakhs, which were stored in the 3rd Defendant's leasehold and never hypothecated with the 1st Defendant Bank.
It is further submitted that the Applicant sent a detailed representation dated 30.03.2024 to the Defendants No. 1 & 2 explaining the that the Applicant has got no knowledge about the loan transactions between the Defendants No. 3 & 4 with the Defendants No. 1 & 2 and further requested the Defendants No. 1 & 2 to grant permission to remove Polyester, cotton, raw materials, semi-finished, and finished yarn totaling eighteen tons that were already stored in the 4th Defendant's property in the leasehold premises located at Arasiyarpatti Village, Rajapalayam Taluk, Virudhunagar District. The Applicant also claimed that the Polyester/cotton, raw materials, semi-finished, and finished yarn were not secured assets held in the 3rd Defendant's leasehold. After receipt of the Representation dated 30.03.2024, the 1st Defendant sent a reply in its proceedings dated 12.04.2024 stating that the 1st Defendant Bank has already taken Physical Possession of the property containing the 3rd Defendant's leasehold premises, which is the secured asset with respect to the loan transaction, and that the 4th Defendant has defaulted on a loan obtained from the 1st Defendant Bank. The 1st Defendant claims that the properties listed in the
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order passed in are still locked, and the 4th Defendant is not even allowed to remove all of the raw materials, finished goods, stock in progress, receivables, stock, spares and other current assets of the borrower 4th Defendant, both now and in the future. All of the movable assets lying on the property were inventoried, and a process of selling the said assets under the SARFAESI Act to recover the outstanding liability is in progress. The 1st Defendant Bank is preventing the Applicant from taking possession of the cotton, raw materials, semi-finished, and finished yarn. Further the 1st Defendant Bank stated that the bank is having paramount charge over the entire current assets including stock and is holding a valid right to dispense the same for recovery of the public money and the Applicant is not having any right/title over the said goods which is under the possession of the 1st Defendant Bank and rejected the request made by the Applicant. The Clause 22 of the Agreement entered between the Applicant and the 3rd Applicant clearly indicate that
"The Goods lying within the premises of the SECOND PARTY's mill shall not be shown as security or otherwise to bankers or to any other person by the SECOND PARTY. The FIRST PARTY is having absolute right and liberty to inspect their stocks kept within the premises of the SECOND PARTY at any stage of production or in warehouse and has liberty to shift such goods outside the mills according to his convenience."
Moreover, the Applicant supplied the goods to the 3rd Defendant pursuant to the Yarn Conversion Agreement dated 17.07.2023. So far, the Applicant supplied a quantity of Polyester and cotton for a value of Delivery Challan for a sum of Rs. 19,86,510/-. Further, as per Section 13(4) of the SARFAESI Act, 2002, the secured creditor may take recourse to recover the secured debt only upon the secured asset of the borrower. Whereas, in the present case, the supply of Polyester and cotton for job based on the agreement dated 17.07.2023 is not a secured asset. Further, the 1st Defendant Bank issued the Demand Notice U/s. 13(2) dated 21.05.2022 for a sum of Rs. 7,69,67,554.60p under Cash Credit Open Loan (CCOL), Rs. 60,00,000/under DBD (LC) in inland Bills purchased & Rs. 1,04,14,009.28p under ECLGS being the amount due as on 20.05.2022. In
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light of the order passed in Crl.M.P.No. 11585/2023 dated 05.01.2024, the 1st Defendant Bank is neither authorized nor competent to retain the cotton yarn, semi-finished yarn, finished yarn, and raw materials supplied by the Applicant, caused further loss to the Applicant by failing to take care of the cotton and raw materials. And, the Demand Notice u/s.13(2) was issued on 21.05.2022, to commence the recovery procedures under the SARFAESI Act provided information about the mortgaged immovable properties and hypothecated moveable goods. The commodities, cotton, and raw materials owned by the Applicant, as listed in Schedule-A appended thereto, are not included in the hypothecated movable property. The prolonged storage of cotton and other raw materials would negatively impact the material in a way that would cause heavy financial burden to the Applicant. The Applicant's limited prayer in the present Application is for permission to remove their goods based on the supply of the delivery Challan for a quantity of 18 tons in the form of Polyester/Cotton, Raw Materials, Threads, Semi-Finished & Finished Goods from the property taken possession of by the 1st Defendant Bank under the provisions of the SARFAESI Act, 2002.
It is further submitted that there is no dispute that the 4th Defendant executed the Hypothecation Agreement, agreeing to pledge the goods as specified in the 1st Defendant's 13(2) Demand Notice dated 21.05.2022 and the hypothecated properties were stored in a mortgaged property with the 1st Defendant. The dispute concerns the custody of the Applicant's goods after they had been kept at the 3rd Defendant's place as specified in the delivery challans dated 22.01.2024, 19.02.2024 & 18.03.2024 though the goods never hypothecated with the 1st Defendant Bank. Furthermore, the Applicant was not aware of the mortgage made by the 4th Defendant in favour of the 1st Defendant. Further, the measures initiated by the 1st Defendant against the non-hypothecated goods of the Applicant is illegal and is liable to be set aside. Hence, this SARFAESI Application.
The Applicant has submitted the following List of documents in
support of his claim in the SA, which are as follows:
| S.No. | Date | Description |
|---|---|---|
| 1. | 21.05.2022 | Certified Copyof Demand Notice U/s. 13(2)of SARFAESI Act, |
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SA No.343/2024
| 2002 | ||
|---|---|---|
| 2. | 02.08.2022 | Certified Copy of Possession Notice U/s. 13(4) of SARFAESI Act, 2002 |
| 3. | 15.07.2023 | Lease Deed executed between the 3rdDefendant and 4th Defendant |
| 4. | 15.07.2023 | PartnershipReconstitution Deed |
| 5. | 17.07.2023 | Yarn Conversion Agreement executed between the Applicant and the 3rdDefendant |
| 6. | 05.01.2024 | Certified copy of the Order passed in Crl.MP.No.11585/2023 by the Hon'ble CJM, Srivilliputhur, Virudhunagar District |
| 7. | 29.02.2024 | Indemnity Bond executed by the 4thDefendant in favour of the Applicant |
| 8. | 13.03.2024 | Certified copy of the Inventory Report and Panchanama submitted by the Advocate Commissioner for Item No.1 as mentioned in the order passed in Crl.M.P.No. 11585/2023 by the Hon'ble CJM, Srivilliputhur, Virudhunagar District |
| 9 | 13.03.2024 | Certified copy of the Inventory Report and Panchanama submitted by the Advocate Commissioner for Item No.3 as mentioned in the order passed in Crl.M.P.No. 11585/2023 by the Hon'ble CJM, Srivilliputhur, Virudhunagar District |
| 10 | 21.03.2024 | Certified copy of the Inventory Report and Panchanama submitted by the Advocate Commissioner for Item No.2 as mentioned in the order passed in Crl.M.P.No. 11585/2023 by the Hon'ble CJM, Srivilliputhur, Virudhunagar District |
| 11 | 21.03.2024 | Certified copy of the Inventory Report and Panchanama submitted by the Advocate Commissioner for Item No.4 as mentioned in the order passed in Crl.M.P.No. 11585/2023 by the Hon'ble CJM, Srivilliputhur, Virudhunagar District |
| 12 | 30.03.2024 | Representation of the Applicant to the Defendant No. 1 & 2 |
| 13 14 |
12.04.2024 -- |
Communication from the 1stDefendant to the Applicant Delivery Challans (3 Nos.) with calculation sheet |
Additional Typed set of Papers filed on 05.08.2024
| S.No. | Date | Description |
|---|---|---|
| 1 | -- | Raw material delivery challans delivered by the Applicant to the 3rd Defendant |
| 2 | -- | Finished Goods delivery challans issued by the 3rdDefendant to the |
| Applicant | ||
| 3 | -- | Abstract of Delivery Challans supply details on raw materials sent |
| bythe Applicant to the 3rdDefendant and finishedgoods delivered |
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by the 3rd Defendant to the Applicant, as well as invoice charges
3 . On the other hand, notices were issued to the Defendants Bank and the Counsel for the 1st Defendant Bank appeared before this Tribunal and filed Vakalat, Reply Statement and Typed set of papers in which he has submitted that they admitted all other allegations in the Application are hereby denied as false and the Applicant is put to strict proof thereof. The Application U/s. 17 of SARFAESI Act is unsustainable on facts in law and in equity. The Application that purports to have been filed by a third party is itself a humbug, as the Application itself is engineered by the borrower and the Applicant is in fact a nominee obliging the borrower, the 4th Defendant. Even otherwise, assuming without admitting that the Applicant purports to agitate in its own projected rights, it is yet unsustainable in law, as the projected right cannot supersede the paramount rights of the creditor bank, which has prior hypothecation rights, besides its rights ensured and reinforced U/s. 26E of the SARFAESI Act.
It is further submitted that the Application has not properly explained that it has been filed in time. Though the Applicant alleges that he came to be aware of SARFAESI proceedings only on noting the lock and seal of the premises of the 4th Defendant, it is conveniently vague. It is submitted that the Application is time barred. Without prejudice to the above legal submissions, the other allegations of the Applicant are all denied as false, fraudulent and on the face of it collusive. The Application builds up a story as though the mill premise was leased by the borrower, the 4th Defendant to and in favour of the 3rd Defendant M/s. Rams & Co. It is very relevant to note that the partners of the 3rd Defendant firm are the directors of the 4th Defendant company. It is transparent there is tripartite collusion amongst the borrower 4th Defendant, its sister concern the 3rd Defendant and the Applicant to delay and defraud the creditor Bank. The Application alleges of lease agreement between the 4th Defendant and 3rd Defendant having been subscribed to on 15.07.2023 on fact, that cannot in any event supersede the Terms & Conditions of the Hypothecation Agreement dated 29.03.2019
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between 4th Defendant borrower and the 2nd Defendant Bank. The Hypothecation Agreement is clear and specific that all the stock in Trade, Goods and all other tangible movable properties in the premises in schedule –III to the Hypothecation Agreement stored now or hereafter from time to time during the security shall constitute the subject matter of Hypothecation Agreement in favour of the 2nd Defendant Bank.
It is further submitted that the so called lease agreement that bears the date 29.03.2019 is long subsequent to the mortgage of the said properties in favour of the bank as also long subsequent to the hypothecation of movables including stock and goods therein in favour of the 2nd Defendant Bank. In the circumstance neither the alleged lessee 3rd Defendant nor the Applicant can have any claim on the movables or the stock in the premises. Further, when the alleged lease agreement dated 15.07.2023 is in violation of Sec.13(13) of the SARFAESI Act in the light of the fact the Demand Notice under Sec.13(2) of the SARFAESI Act was issued on 21.05.2022, no claim can be made on foot thereof. In other words, the lease deed dated 15.07.2023 is totally invalid in law and cannot be relied upon for canvassing any claim. This Defendant does not admit the so called delivery challan dated 22.01.2024, 19.02.2024 and 18.03.2024, which all bears the dates subsequent to event to Sale Notices under the SARFAESI Act. The challans are obviously got ready for projecting a false claim, which in any event are untenable in law.
It is reiterated that the 3rd Defendant being the sister concern of the 4th Defendant, the lease deed dated 15.07.2023 is sham and nominal and invalid in any event. It is relevant to note that the 3rd Defendant has not even formally obstructed the SARFAESI proceedings including takeover of Physical Possession of the premises U/s.14 of the SARFAESI Act. It is transparent the claim of the Applicant also is illegitimate without any bonafide. The Application is not only wanting in merits but the submissions and allegations therein are wanting in bona fides and earnestness. The
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appeal is therefore factually, legally and also in equity unsustainable and has to be dismissed with cost.
Wherefore, it is prayed that this Hon'ble Tribunal may be pleased to dismiss the Application with cost and thus render justice.
Typed set of Papers filed by the 1st Defendant Bank on 05.08.2024
| S.No. | Date | Particulars |
|---|---|---|
| 1. | 29.03.2019 | Hypothecation Agreement for Rs. 7,25,00,000/- |
| 2. | 29.03.2019 | Hypothecation Agreement for Rs. 2,00,00,000/- |
| 3. | 29.03.2019 | Hypothecation Agreement for Rs. 7,67,00,000/- |
| 4. | 02.08.2022 | Possession Notice & its Paper Publication |
| 5. | 17.12.2022 | 1stSale Notice & its Paper Publication |
| 6. | 24.02.2023 | 2ndSale Notice & its Paper Publication |
| 7. | 09.05.2023 | 3rdSale Notice & its Paper Publication |
| 8. | 22.03.2024 | 4thSale Notice & its Paper Publication |
| 9. | 15.05.2024 | 5thSale Notice & its Paper Publication |
4. ON THE BASIS OF ABOVE PLEADINGS THE POINT WHICH ARISES FOR CONSIDERATION IS:-
I. Whether the Applicant has been able to prove his case in his favour?
II. Whether the Applicant is entitled to get the reliefs as prayed for?
5 . Having heard the parties and after going through the entire documents available on the records, I find that the Applicant is the 3rd Party who is neither a borrower nor guarantor in relation to the credit facilities sanctioned in favour of the 4th Defendant by the 1st Defendant Bank and the 3rd Defendant is one of the Guarantor. There was no privity of contract between the Applicant and the Bank. The Applicant was not aware of any transaction between the Bank and 4th Defendant herein nor of any charge over the machinery and equipment etc. And the Applicant entered into a job work agreement namely Yarn Conversion Agreement dated 17.07.2023 with the Defendant No. 3, the so-called tenant of the mortgaged property and
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pursuant thereto it had been supplying the raw material to the Defendant No. 3 as per its requirements and had been converting the raw material into the finished goods as per the specification and requirement of the Applicant from time to time. I also find that the borrower, the 4th Defendant and the guarantor, the 3rd Defendant in this case, did not appear before this Tribunal for adjudication. Further, the 3rd Defendant has not even formally obstructed the SARFAESI Proceedings including takeover of Physical Possession of the premises U/s. 14 of the SARFAESI Act. Instead, he not even appeared inspite of several notices issued by this Tribunal. The 3rd and 4th Defendants have neither appeared before this Tribunal nor sent any Reply Statement in this connection. However, the Applicant is claiming that the mortgaged property was ceased by the Bank, hand over the non hypothecated goods of cotton, raw materials, yarn, threads belonging to the Applicant which were supplied through delivery challans dated 22.01.2024, 19.02.24 & 18.03.24 totally for a quantity of 18809.10 tons to the 3rd Defendant from the 4th Defendant premises by the Order of Ld. CJM, Srivilliputhur, Virudhunagar District.
It is also admitted fact that the Defendant No. 4 has taken loan from the Defendant No. 1 after mortgaging property. It is also case of the Applicant that the Defendant No. 4 has leased out the Mortgaged property to the Defendant No. 3 and the Applicant entered into the Job work agreement namely Yarn Conversion Agreement dated 17.07.2023 with the Defendant No. 3 and pursuant thereto he was supplying the raw material to the Defendant No. 3 as per his requirements and had been converted the raw materials into the finished goods as per the specification and requirement of the Applicant from time to time at the work place as mentioned in Item No.4 of the Impugned Order dated 05.01.24 passed by the Ld. CJM.
It is further submitted that all of a sudden on 05.01.2024, the 1st Defendant Bank had obtained the Physical Possession of the stocks owned by the Applicant lying in the premises of the 3rd Defendant and even without preparing inventory of the stocks. And the said property was not
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hypothecated with the 1st Defendant Bank which has no lien over the same, thus, Bank cannot be permitted to take possession of the same.
On the other hand, the Defendant Bank has vehemently opposed the allegation of the Applicant and submitted that the leased agreement was executed on 15.07.23 between the 4th and the 3rd Defendant which is done after taking the loan and after execution of the Mortgage deed. The Applicant has filed lease deed which is available at page no. 52 of typed set of paper, which clearly shows that this lease document was executed on 15.07.23 between M/s. EKS Spinners Pvt. Ltd. (D-4) and its partner Mrs. R. Amutha (D-3). The Bank has also submitted that there was a Hypothecation Agreement created on 29.03.19 between the borrower, the 4th Defendant and the 2nd Defendant Bank. I perused the Hypothecation Agreement, which is available at page no. 1 to 27 of the Bank's typed set of papers. Whereas, it has been mentioned in the Hypothecation Agreement dated 29.03.2019
"Whereas at the request of the Borrower, the Bank has advanced or allowed and or agreed to advance or allow or continued or agreed to continue the credit facilities morefully described in Schedule II to this Agreement, to be secured by borrowers demand promissory note (if any) and/or other securities in favour of the bank and or order and be further secured as herein provided.
In consideration of the Bank having advanced or allowed or continued or agreed to continue all or some or any of the credit facilities for the purposes and subject to the Terms & Conditions specified and contained in various Deeds, documents, writings.
(a) The Borrower(s) hereby hypothecate with the Bank, the property described in general terms herein and in details in the Schedule IV, hereinafter referred to as "the goods" or "hypothecated goods", which expression shall mean and include all produce, goods, and other movable property of any kind including machinery, vehicle(s), its/their accessories, implements etc., belonging to the Borrower(s) which now or hereafter from time to time during the continuance of this agreement shall be brought in, stored or be in or about their premises or godowns at the place specified in Schedule III to this Agreement or any other godown(s) as approved by the Bank or be in course of transit from one godown to another or from one place to another or wherever else the same may be,
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(b) The borrower(s) hereby assign and transfer in law as well as in equity and hypothecate, all their present and future actionable claims and other movable property that may arise or come into existence in the future, including book debts decrees and decreetal debts, outstanding moneys receivable, hire purchase receivable/documents and contractual rights arising there from, other claims, (including counter-claims and claims under insurance policies including life insurance Policies), bills including Government supply bills, contracts, securities, investments, bank deposits and other deposits, beneficial rights to other movable property and other assets."
Having gone through the above hypothecation deed, I find that this hypothecation agreement was executed before the execution of the lease deed dated 15.07.23 and the contents of the Hypothecation Agreement is very clear that "all the stock in Trade, Goods and all other tangible, movable properties in the premises in schedule-III to the Hypothecation Agreement stored now or hereafter from time to time during the security shall constitute the subject matter of Hypothecation Agreement in favour of the 2nd Defendant Bank. I also find that in this case neither the borrower (4th Defendant) nor the tenant (3rd Defendant) appeared before this Tribunal. However, the perusal of documents clearly shows that the lease document was created by the Defendant no. 4 in favour of Defendant No. 3 after the execution of Mortgage deed. I also find that Bank has issued Demand Notice on 21.05.2022, thereafter he issued Possession Notice on 02.08.2022. So, I find that the Defendant No. 4 who was the borrower of this case has executed the lease deed in favour of the Defendant No.3 on 15.07.23, which clearly shows that borrower has transferred the mortgaged properties to the Defendant No. 3 after receipt of Demand Notice by way of lease of his secured assets referred in the notice, without prior written consent of the secured creditor. Because there is no document shows that Defendant No.4 has taken permission to transfer the mortgaged property of lease to the other person. So, this lease agreement is in violation of Section 13(13) of SARFAESI Act. I also do not find that the Defendant No. 4, the actual borrower and the Defendant No. 3, the tenant of the Mortgaged property have challenged any of the measures taken by the Bank.
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However, Hypothecation Agreement clearly mentioned that the Bank has right to take all the stocks in Trade, Goods, and all other tangible, movable properties in the premises in Schedule-III to the Hypothecation Agreement stored now or hereafter from time to time during the security shall constitute the subject matter of Hypothecation Agreement in favour of the 2nd Defendant Bank. So, there is no illegality in taking all the movable article inside the Scheduled property as mentioned in the Ld. CJM Order by the Defendant Bank. However, this lease deed was created after issuance of the Demand Notice and the Possession Notice. So, it says that the borrower has transferred the property by way of lease to the D-3, with intention to defeat or delay the creditors to recover the public money without any defeat or delay. The Bank has taken the possession of schedule property alongwith all the articles inside the premise in the light of Hypothecation Agreement as mentioned above.
6. In view of the above facts and circumstances of the case, I do not find any merit in the Application filed by the Applicant. The Defendant Bank has followed the procedure as per the Hypothecation Agreement and he has ceased the scheduled properties in the light of Hypothecation Agreement.
Accordingly, this SA No. 343/2024 stands dismissed with no costs. Consequently, all pending IAs (if any) are also disposed of.
Dictated to PA (DK), taken down, transcribed, typed by her, corrected and pronounced by me in the Open Court in this the 22nd October, 2024.
sd/- (SEEMA SINHA) PRESIDING OFFICER
Dictated & Corrected by me sd/ -
(SEEMA SINHA)
PRESIDING OFFICER
Typed by me (D. Krishnaveni, PA)
Order uploaded on 28.10.2024
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3 issues framed by the court
Whether the bank was entitled to take possession of the mortgaged property leased to a third party after issuing the demand and possession notices.
Whether the lease agreement executed after the demand notice violated the SARFAESI Act and prevented the applicant from retrieving goods.
Whether the applicant is entitled to the direction to open locks and seal the premises to remove non-hypothecated goods.
3 provisions across 1 enactments
M/s. Sri Murugar Spinning Mill
The South Indian Bank Limited
Rams & Co
M/s. E K S Spinners Private Limited
SEEMA SINHA
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
